Mortgage Offset Calculator
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How a mortgage offset account changes payoff year
Interest on an Australian home loan with an offset account is charged on the loan balance minus the offset balance. The cash in offset still belongs to you. Your regular repayment does not change. Because less interest is charged, more of each repayment reduces principal, so the loan can finish earlier.
Extra deposits into the offset grow that balance over time. They are not extra principal repayments. This calculator uses the repayment you enter — weekly, fortnightly, or monthly — and does not invent a minimum P&I amount from the loan term. Interest is estimated daily on (loan − offset) using a 365-day year.
If your offset balance exceeds the loan balance, interest is calculated on zero (the loan amount minus offset cannot go below zero). In this scenario, no interest accrues on the loan, and your entire repayment reduces the principal. This accelerates payoff significantly. However, the offset account cannot eliminate the loan balance faster than your repayment allows—interest can only reduce to zero, not negative.
Note: Some lenders may automatically close your offset account or cease providing offset benefits once your offset balance exceeds your loan balance. Check your loan terms or contact your bank to understand their policy for your product.
Once your home loan is fully paid off, the offset account is not automatically deducted or consumed. The offset balance remains entirely yours as a standard savings or transaction account with your bank. No interest is charged on the loan after payoff, so the offset account no longer provides any interest-saving benefit—it simply becomes a regular account holding your money.
Important: The money in your offset account is not directly used to pay down the mortgage principal. Instead, the offset balance reduces the amount of interest charged each day. By lowering your interest charges, more of your regular repayment goes toward principal, which accelerates payoff. Without an offset account, the same repayment amount results in more interest paid and slower payoff.
With offset vs without offset
Both scenarios use the same outstanding loan, interest rate, and actual repayment. The without-offset side ignores the offset balance and extra offset deposits. The with-offset side applies your current offset and any regular extra deposits. Compare payoff year and total interest to see how much sooner the loan may be paid off.
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Mortgage offset FAQ
What is a mortgage offset account?
An offset account is a transaction account linked to your home loan. The balance in the offset reduces the loan amount that interest is charged on. If you owe $500,000 and have $40,000 in offset, interest is charged on $460,000. The offset balance itself is not a repayment — you still own that cash, and the scheduled repayment stays the same. Because less interest is charged, more of each repayment reduces principal, so the loan can finish earlier.
Why does the repayment amount matter so much?
Payoff year is driven by the amount you actually pay the lender, not a theoretical minimum. If the calculator invented a P&I repayment from the loan, rate, and term, it could ignore extra you already pay — or assume a repayment you cannot make. Enter weekly, fortnightly, or monthly the amount that leaves your account. If that amount does not cover the interest charged, the loan does not pay off in this model.
Does weekly, fortnightly, or monthly repayment change the result?
Yes, because repayments are applied on a weekly, fortnightly, or monthly schedule, and interest is estimated daily on (loan − offset). $1,000 a week is also a larger annual total than $1,000 a month (×52 vs ×12). Choose the frequency that matches how you actually pay, then enter that period’s amount.
How do extra deposits into the offset work?
Extra deposits stay in the offset account. They are not extra principal repayments. They are added on the same weekly, fortnightly, or monthly schedule you choose, which reduces the daily interest charged from the next day. The without-offset comparison uses the same loan repayment and ignores extra offset deposits, so you can see the effect of the offset strategy on its own.
How accurate is the offset payoff estimate?
This calculator estimates interest daily on (loan − offset) using a 365-day year, then applies your actual weekly, fortnightly, or monthly repayment. Unpaid interest is charged to the loan 12 times per year. Lenders may use 365 or 365.25 days and different posting rules, so results are educational estimates, not a bank statement. Confirm figures with your lender; seek a licensed adviser if you need personal guidance.
Is the Mortgage Offset Calculator financial advice?
No. Outputs are for informational and educational purposes only and do not constitute financial, credit, tax, or investment advice of any kind. Offset features, redraw, and interest calculation methods vary by lender. Seek advice from a licensed financial adviser or mortgage broker if you need personal guidance about your loan or savings arrangements.
Seek independent professional advice if you need personal guidance
These tools do not provide financial, investment, credit, legal, or taxation advice of any kind. If you need personal advice about a property, investment, or financial matter, speak with a licensed financial adviser, registered tax agent, mortgage broker, or qualified legal practitioner. Past performance and projected figures are not reliable indicators of future results.