Is an offset account better than making extra repayments?

Interest savings are identical, but offset keeps funds accessible. For investment loans, offset is also more tax-effective as it doesn't contaminate deductible debt.

Do all home loans in Australia offer an offset account?

No. Offset accounts are most common with variable-rate and package loans. Fixed-rate and basic loans often exclude them.

Should I put my emergency fund in an offset account?

Yes — you save interest at your mortgage rate (often 6%+), far better than a savings account, while keeping full access to funds.

Australian Offset Account Calculator

See exactly how much interest your offset account saves and how many years sooner you'll pay off your home loan. AUD.

Loan Amount

Interest Rate

% p.a.

Loan Term (years)

yrs

Current Offset Balance

Monthly Savings to Offset

Interest Saved with Offset

A$423,708

Pay off 9 years and 7 months sooner

Monthly Repayment

A$3,675

Without Offset — Total Interest

A$722,933

With Offset — Total Interest

A$299,225

Interest Saved

A$423,708

Loan Term Without Offset

30 years

Loan Term With Offset

20 yrs 5 mo

How the Offset Account Calculator Works

Enter your Loan Amount, Interest Rate, and Loan Term. Then add your Current Offset Balance and how much you plan to add each month (your salary deposits or regular savings). The calculator models interest savings month by month as your offset balance grows.

The monthly repayment stays fixed — but with offset, a larger proportion goes to principal each month since less interest accrues.

How Offset Accounts Work

Effective Loan Balance = Loan Balance - Offset Account Balance
Monthly Interest = Effective Balance × (Annual Rate / 12)

Example: $600,000 loan at 6.20%, $80,000 offset
Without offset: interest = $600,000 × 6.20%/12 = $3,100/month
With offset: interest = $520,000 × 6.20%/12 = $2,687/month
Monthly saving: $413 — all going straight to principal

Offset accounts are especially powerful for people who keep large balances in savings. In Australia, the offset works dollar-for-dollar against your loan balance, and you don't pay tax on the "interest saved" (unlike earning interest on a savings account which is taxable at your marginal rate).

Example: Melbourne Professional

$700,000 Loan — $100,000 Offset + $2,000/mo Salary Deposits

Loan Amount	$700,000
Rate	6.20% p.a.
Term	30 years
Offset Balance (start)	$100,000
Monthly additions to offset	$2,000
Total interest without offset	$868,800
Total interest with offset	$452,000
Interest Saved	$416,800
Loan paid off	14 years 8 months sooner

Frequently Asked Questions

The interest savings are mathematically identical, but offset accounts have a key advantage: flexibility. Money in an offset remains accessible — you can withdraw it if needed. Extra repayments made directly to the loan may be locked in (depending on whether you have a redraw facility). For investment loans, the offset is also more tax-effective since you don't contaminate deductible debt.

No. Offset accounts are most common with variable-rate home loans and package loans. Many fixed-rate loans don't offer a fully offset account (some offer partial offset at 100% of interest savings limited to $XX). Basic/no-frills loans also often exclude offset. Expect to pay a slightly higher rate or annual fee for an offset feature.

Yes — keeping your emergency fund (and any large upcoming expenses) in your offset account is highly recommended. You save mortgage interest at your home loan rate (often 6%+), which is far better than earning 4–5% in a savings account (which is also taxable). The funds remain completely accessible whenever needed.