How an offset account saves interest
Checked 15 Oct 2026. Repayments use the same formula as Moneysmart's mortgage calculator, with interest charged at your repayment frequency.
On a $600,000 loan at 6% over 30 years, keeping $50,000 in offset saves $202,175 in interest and finishes the loan 4 years 8 months sooner. $100,000 in offset saves $338,658 and 7 years 10 months. Both assume the balance stays the same and you keep paying $3,597 a month.
An offset account is a transaction account linked to your home loan. Its balance is subtracted from your loan balance before interest is calculated, so $50,000 in offset on a $600,000 loan means you're charged interest on $550,000.
Because your repayment stays the same, more of each payment goes to principal and the loan finishes early. This calculator compares the loan with and without the offset to show interest and time saved.
Offset or savings account?
Every dollar in offset "earns" your home loan rate, with no tax on it, because interest you don't pay isn't income. Savings account interest is taxed at your marginal rate, so a savings account has to pay well above your loan rate to beat an offset. The catch: offset accounts usually come with a package fee, often a few hundred dollars a year, and only on variable or part-fixed loans.
General information only, not financial, tax or credit advice. Check your situation with the ATO, your state revenue office or a licensed adviser.
Offset account FAQs
How much does $20,000 in an offset account save?
$91,647 in interest and 2 years 1 month off a $600,000 loan at 6% over 30 years, if the $20,000 stays there and you keep paying $3,597 a month.
How much does $50,000 in offset save on a $500,000 loan?
$194,606 in interest and 5 years 4 months, at 6% over 30 years with the normal $2,998 monthly repayment. Offset money saves more when it's there early in the loan.
Is an offset better than extra repayments?
Financially they save the same interest. An offset keeps your money accessible; extra repayments may be harder to withdraw (redraw rules vary by lender).
Does the calculator assume my offset balance changes?
No, it assumes a constant balance. In practice your balance moves with your pay and spending, and even money that sits there for a few weeks between pay days helps.
Is offset interest saving taxable?
Interest saved through an offset isn't income, so it isn't taxed, unlike interest earned in a savings account. Check your own situation with a tax professional.