Offset account savings calculator
See how much your offset balance saves in interest — and whether the fee premium is worth it.
Calculator mortgageLogic updated May 2026
This calculator runs a month-by-month simulation of your loan with and without the offset balance, comparing the total interest paid in each scenario. The difference is the gross interest saving. Subtract the cumulative annual fee premium over the loan term and you get the net saving — which can be positive (the offset wins) or negative (the fees cost more than the saving). The break-even fee shows what annual fee differential would leave you exactly neutral.
How this is calculated
Formula
effectiveBalance = max(0, loanBalance − offsetBalance); interest = effectiveBalance × monthlyRateStep-by-step
- Calculate the base monthly repayment from the standard amortisation formula on the original principal, rate, and term
- Simulate the base loan month by month, summing interest on the full balance each period — this gives baseInterestTotal
- Simulate the offset loan month by month using the same base payment, but each period's interest is calculated on (balance − offsetBalance) — capped at zero when the offset exceeds the balance
- Count how many periods the offset simulation runs — the difference from base periods is the time saved
- Cumulative fees = annualFeesDifferential × loanTermYears
- Net saving = interestSaved − cumulativeFees
- Break-even fee = interestSaved / loanTermYears — the annual fee at which net saving is exactly zero
- Daily saving = offsetBalance × (annualRatePercent / 100) / 365 — current rate of interest the offset prevents per day
- Weekly saving = dailySaving × 7
- Monthly saving = offsetBalance × (annualRatePercent / 100) / 12 — uses monthly-compounding convention, not daily × 30
- Rounding mode
- ROUND_HALF_UP
- Precision
- 20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
- Logic last reviewed
Assumptions & limitations
What this calculator assumes
- The daily, weekly, and monthly figures show your current rate of saving — the interest your offset balance is preventing today. The total interest saved over the loan life is higher than a flat extrapolation of these rates would suggest because, as the loan principal shrinks, your offset balance covers a larger share of the remaining balance, accelerating payoff and increasing the effective saving rate over time. Concretely: an offset balance saves more interest in year 30 (when the remaining principal is small) than in year 1 (when the principal is full). The daily/weekly/monthly figures are a snapshot of your current saving rate, not an average over the loan term.
- The offset balance is constant throughout the loan — you maintain the same average balance every month
- The offset account fully offsets interest on the covered portion of the balance (100% offset, not partial)
- Repayment frequency affects only the display of the base repayment amount — the simulation always runs monthly
- The annual fee premium is paid in full every year for the entire loan term regardless of when the loan ends
- Fixed interest rate for the entire loan term
- The offset balance is less than the loan balance (inputs equal to or exceeding the principal trigger a recovery message)
What this calculator doesn’t account for
- Does not model a fluctuating offset balance — the average balance you enter is treated as constant
- Does not account for tax effects when the loan is for an income-producing property
- Does not model redraw facility access or split loan structures
- Does not include other fee types (application, discharge, monthly account fees) — only the differential you enter
- Does not model variable rate changes during the loan
Worked example
A borrower with a $600,000 loan at 6.25% over 30 years maintains a $50,000 average offset balance and pays a $400/year fee premium for the offset product.
| Input | Value |
|---|---|
| Loan amount | $600,000 |
| Interest rate | 6.25% |
| Loan term | 30 years |
| Offset balance | $50,000 |
| Annual fee premium | $400/year |
Approximately $78,000 gross interest saved; roughly $12,000 in cumulative fees; net saving around $66,000
The $50,000 in the offset account reduces the effective loan balance by about 8%. Over 30 years that compounds significantly because every month's interest is charged on a smaller balance — the effect is not linear. The $400 annual fee totals $12,000 over the term, which is comfortably less than the $78,000 saving. The break-even fee is around $2,600/year — so at $400, the offset is well justified.
Frequently asked questions
What does 'average offset balance' mean?
It is the typical balance you maintain in the linked transaction account over the life of the loan. Offset accounts are usually linked to everyday accounts, so the balance fluctuates. The calculator assumes this average stays constant. If your balance will grow over time (e.g., as your income increases), the actual saving will be higher than this estimate.
Does the offset account reduce my repayment or shorten my loan?
In most Australian products the repayment stays the same — more of each payment goes to principal because less is eaten up by interest. This shortens the loan term rather than lowering the monthly payment. That is the model this calculator uses. Some lenders offer a 'reduce repayment' variant — check your product's terms.
When does an offset account cost more than it saves?
When the annual fee premium is higher than the interest saving per year — which can happen if your offset balance is small relative to your loan, your loan has a low interest rate, or your term is short. The net saving will show as negative and the calculator will display the break-even fee so you can see what balance or rate would make it worthwhile.
Is an offset account the same as a redraw facility?
No. An offset account is a separate transaction account whose balance reduces the interest you are charged. A redraw facility lets you access extra repayments you have already made. Both reduce interest, but the mechanics differ: offset interest is calculated daily on the difference between your loan balance and your offset balance; redraw simply lowers the outstanding principal. Offset accounts typically come with higher fees.
How accurate is the constant offset balance assumption?
For planning purposes it is a useful benchmark — it gives you the saving at your target average balance. In practice most people's balance fluctuates between pay cycles (low before pay day, higher just after). The monthly simulation captures the economic effect of offsetting, but not the intra-month timing. The real saving could be slightly less if balances are often near zero mid-cycle.
Why is my daily/weekly/monthly saving different from my total saving over the loan life?
The daily, weekly, and monthly figures are your current saving rate — the interest your offset balance is preventing right now based on your current loan principal and rate. The total interest saved over the loan term is higher than a flat extrapolation of these rates would suggest. This is because the offset balance covers a progressively larger share of the remaining principal as the loan is paid down, which increases the saving rate over time. Think of it this way: $30,000 in offset on a $500,000 loan offsets 6% of the balance today. In year 25, when the balance might be $150,000, the same $30,000 offsets 20% of the balance — so the daily saving rate is much higher then. The lifetime total captures all of these rising saving rates compounded across every period.
Embed this calculator
Add this calculator to your website. Free to use with attribution.
The calculator will resize to fit your content area. Please keep the attribution link visible — replace YOUR_SITE with your domain so we can attribute traffic correctly.