The Offset Account Calculator runs a full month-by-month simulation of an Australian offset home loan — not just the back-of-envelope "balance times rate" shortcut (though it reports that too). Enter your loan amount (default $500,000), mortgage rate, term, current offset balance, and any monthly amount you add to the offset, and it simulates the loan with and without the offset to give you the interest saved, the time saved, and your actual payoff date.
How It Works
Each month, interest is charged only on the difference between the loan balance and the offset balance:
Your repayment stays the standard repayment calculated on the full loan, so every dollar of interest avoided becomes extra principal repaid — which is why an offset shortens the loan instead of lowering the payment. The offset balance grows by your monthly addition each month in the simulation. Interest-only loans are supported too: principal stays untouched during the IO period while the offset still reduces interest.
The simple figures are also reported: annual interest saved on a static balance (offset × rate) and a year-1 estimate that accounts for your monthly additions averaging half a year of growth.
Worked Example 1: A Steady $50,000 Offset
Loan **2,997.75). Without any offset, total interest is 50,000 parked in the offset throughout:
- Total interest falls to 194,606.16 saved
- The loan clears in 296 months instead of 360 — 5 years 4 months early
- Year-1 interest saved: 3,000**
Note the shape: 194,606 over the life. The static shortcut (balance × rate × years) would guess $90,000 over 30 years and be wrong in both directions — it misses that every saved dollar reduces the balance, which reduces next month's interest base even before the offset is counted. Only the simulation captures the snowball.
Worked Example 2: A Smaller Offset That Grows
Offset starting at 500 a month: total interest 246,485.88 — more than Example 1 despite starting $30,000 lower — and the loan clears in 278 months, about 6 years 10 months early. The monthly habit beats the static lump because the offset balance climbs steadily into the years when the loan balance is still large and interest heaviest. Salary cycling works the same way in miniature: wages landing in the offset and bills leaving late in the cycle keep the average daily balance higher than the month-end figure suggests.
Offset vs the Alternatives
The return on an offset balance is your mortgage rate, tax-free and risk-free: interest you never pay is not taxable income, unlike interest a savings account earns. At 6%, a dollar in offset outperforms a dollar in a 4.5% savings account for anyone with a marginal tax rate — the savings account's after-tax return is nearer 3%. Against paying the cash directly into the loan (redraw), the offset keeps the money accessible without a redraw request and preserves the loan's structure if the property later becomes an investment — the reason offset is the default recommendation for money you might need again. Package fees for offset loans (often a few hundred dollars a year) are the friction to weigh against the saving; on these examples the fee would need to be implausibly large to change the answer, but on a $5,000 average offset it genuinely can.
Limitations
The simulation assumes your offset balance is the starting amount from day one (growing by the stated monthly addition), a constant interest rate for the entire term, and the standard repayment throughout — real variable rates move, balances fluctuate daily, and most borrowers refinance or restructure within 30 years, all of which change realized savings. The legacy "total interest saved" figure (annual saving × years) is reported for reference and systematically misestimates for the reasons Example 1 explains; rely on the simulation totals. The calculator models one loan and one offset; splits, multiple offsets, and fixed-rate portions (which usually cannot be offset) are outside it.
Frequently Asked Questions
Why doesn't my repayment go down when I add money to the offset?
By design. Australian offset loans keep the contractual repayment fixed and let the interest saving accelerate principal reduction — you finish early instead of paying less per month. If you need the payment itself reduced, that is a loan restructure or a recast, a different conversation with the lender.
Is 100% of my offset balance really deducted?
With a full (100%) offset account, yes — every dollar offsets a dollar of loan balance for interest purposes, which the simulation assumes. Some products offer partial offsets (for example only 40% of the balance counts); if yours is partial, scale your entered balance by that percentage to approximate the effect.
Offset or extra repayments — which saves more?
On identical balances, the interest saving is the same dollar for dollar; the difference is flexibility and tax structure, not arithmetic. Money in the offset stays yours to spend tomorrow; money paid into the loan must be redrawn, may be restricted, and can create tax complications if the property becomes a rental. The simulation's payoff acceleration comes from the offset mimicking extra repayments while remaining liquid.