Australian Home Loan Offset Calculator
See how an offset account changes your home loan — interest saved and time cut from the loan term in AUD.
AU Home Loan Offset Calculator
Interest saved with an offset account · RBA-referenced rates
Offset Summary
MONTHLYYour offset summary
A plain-English read of the estimated effect of the offset account — based on the inputs provided, with repayments modelled at the original monthly level and interest approximated monthly.
Interest saved at different offset balances
Estimated interest saved over the loan as the offset balance changes, holding the loan amount, rate, term and any monthly contribution constant. A higher offset balance reduces the interest-bearing portion of the loan.
| Offset Balance | Total Interest | Interest Saved | Time Saved |
|---|
Loan balance over time
Estimated outstanding loan balance year by year, with and without the offset account. With the offset balance reducing interest, the balance falls faster and reaches zero earlier.
Total interest — with vs without offset
A comparison of the estimated total interest paid over the loan, with and without the offset balance applied. The difference is the illustrative interest saved.
How a Home Loan Offset Account Works
A reference guide to offset accounts on Australian home loans — the mechanics, how offset compares to redraw, and worked examples. Figures referenced from ASIC MoneySmart and the RBA.
Offset Accounts in the Current Rate Environment
The RBA cash rate target sits at 4.85% (effective 4 November 2026). Lenders set their own rates, and based on RBA Housing Lending Rates data, the average new owner-occupier variable rate was around 6.2% p.a. in September 2026, now reflecting the 6 May 2026 cash-rate rise. Individual rates vary by lender.
Offset accounts are generally available on variable-rate home loans, and most new owner-occupier loans in Australia are variable rate. When interest rates are higher, the dollar value of interest saved by an offset balance is larger, because interest is charged on a smaller balance each month.
How an Offset Account Works
The core mechanics of a mortgage offset account, based on ASIC MoneySmart guidance. Treatment and features can vary by lender — these are general descriptions only.
The mechanics
A mortgage offset account is a transaction account linked to a home loan. The balance held in the offset account is subtracted from the loan balance before interest is calculated. Per ASIC MoneySmart, on a AUD 500,000 loan with AUD 20,000 in the offset account, interest is charged on AUD 480,000. Money in the account does not earn interest; the benefit is the interest saved on the loan. Lenders generally calculate interest daily on the net balance and charge it monthly.
Why it can shorten the loan term
When repayments are held at the original level, a smaller interest charge means a larger share of each repayment reduces the principal. Reducing the principal faster lowers the total interest paid over the loan and can bring the loan term forward. This is the basis of the "interest saved" and "time saved" figures produced by the calculator above.
Full offset vs partial offset
A 100% (full) offset counts the entire offset balance against the loan when interest is calculated. A partial offset counts only a portion of the balance — for example, a 50% offset with AUD 50,000 in the account offsets AUD 25,000 of the loan balance. The calculator above models a full offset.
What it can cost
Some offset-eligible loans carry a higher interest rate or an annual package fee than loans without the feature. The net benefit of an offset account depends on whether the interest saved exceeds any additional rate or fee, which varies by lender and loan size. Fees, access rules, and offset eligibility are set by the relevant lender.
100% Offset
The full offset balance reduces the interest-bearing loan balance. A higher balance means interest is charged on a smaller amount, so more of each repayment reduces the principal.
Partial Offset
Only a set proportion of the offset balance is counted against the loan. The interest saved is lower than a full offset for the same balance.
Salary & Savings Credited
Crediting income and keeping savings in the offset account raises the average balance, which increases the interest offset for the days the funds remain in the account.
Withdrawals Reduce the Benefit
Funds remain fully accessible. Any amount withdrawn lowers the offset balance for that period, which reduces the interest offset and the time saved.
Offset Account vs Redraw Facility
Both features can reduce the interest charged on a variable-rate home loan, but they work in different ways. The table summarises the general distinctions described by ASIC MoneySmart.
| Factor | Offset Account | Redraw Facility |
|---|---|---|
| What it is | A separate transaction account linked to the home loan | A feature within the loan that holds extra repayments |
| How interest is reduced | Offset balance is subtracted from the loan balance before interest is calculated | Extra repayments reduce the loan balance directly |
| Access to funds | Funds are generally accessible at any time, like an everyday account | Available extra repayments can be withdrawn; access depends on loan terms |
| Loan type | Generally available on variable-rate loans | Generally available on variable-rate loans |
| Treatment of funds | Held separately from the loan; loan balance is unchanged | Sit inside the loan; reduce the loan balance owing |
| Notes | Money in the account does not earn interest; the benefit is interest saved | Available redraw may reduce over the loan term so both balances reach zero at term end |
Worked Examples
Illustrative scenarios showing how an offset balance affects interest and loan term, using the same monthly model as the calculator above. Figures are examples only, exclude fees, and do not reflect any individual's circumstances.
Home Loan Offset Savings Snapshot
Illustrative interest saved on a reference home loan, with RBA rate context
Reference loan: AUD 600,000 · 6.20% p.a. · 30 yrOffset Savings Analysis
Illustrative, reference AUD 600,000 loan
Loan Balance Over Time
With vs without a AUD 50,000 offset
Repayment Split (with offset)
Principal vs total interest, reference loan
Total Interest by Offset Balance
Illustrative, reference AUD 600,000 loan
| Offset Balance | Total Interest | Interest Saved | Time Saved |
|---|---|---|---|
| AUD 0 | AUD 722,933 | AUD 0 | — |
| AUD 25,000 | AUD 603,389 | AUD 119,544 | 2y 8m |
| AUD 50,000 | AUD 508,260 | AUD 214,673 | 4y 10m |
| AUD 100,000 | AUD 365,671 | AUD 357,262 | 8y 1m |
| AUD 150,000 | AUD 264,187 | AUD 458,746 | 10y 4m |
| AUD 200,000 | AUD 189,314 | AUD 533,619 | 12y 1m |
| AUD 300,000 | AUD 90,646 | AUD 632,287 | 14y 4m |
Home Loan & Offset — Rate & Lending Updates
Recent RBA cash rate decisions and ASIC MoneySmart guidance affecting variable-rate home loans and offset savings — sourced from official channels. As loan rates change, the dollar value of an offset balance changes too.
RBA Raises Cash Rate to 4.35%
The Reserve Bank increased the cash rate target by 25 basis points to 4.35%, its third increase of 2026, citing a pick-up in inflation and higher fuel and commodity prices.
Key Points
- Cash rate target increased by 0.25 points to 4.35%, effective 6 May 2026
- Third 25-basis-point increase of 2026
- Inflation picked up materially in the second half of 2025 and into 2026
- Lenders set their own variable rates and may pass on changes independently
Impact
Variable home loan rates generally move with the cash rate. At higher rates, a given offset balance offsets more interest in dollar terms.
What to Watch
The cash rate was held at 4.35% on 16 June and 11 August 2026, then raised to 4.60% on 29 September 2026 (effective 30 September); the next decision is scheduled for 3 November 2026.
RBA Lifts Cash Rate to 4.10%
The RBA increased the cash rate target to 4.10% in March, the second increase of 2026, as underlying inflation remained above the 2–3% target band.
Key Points
- Cash rate target raised to 4.10%
- Second 25-basis-point increase of 2026
- Underlying (trimmed mean) inflation held above the RBA's 2–3% target band
Impact
A higher cash rate flowed through to variable home loan rates for many borrowers.
What to Watch
The current cash rate target is published on the RBA Cash Rate page.
RBA Increases Cash Rate to 3.85%
The RBA raised the cash rate target to 3.85% in February, the first increase of 2026, after three rate cuts earlier in 2025 and a hold through the final months of the year.
Key Points
- Cash rate target raised to 3.85%
- First increase of 2026, after a hold in the final months of 2025
- Marked a shift from the rate-hold settings of late 2025
Impact
The start of the 2026 tightening cycle that lifted variable home loan rates over the following months.
What to Watch
RBA monetary policy decisions are published after each board meeting.
Home Loan Offset — Frequently Asked Questions
Common questions about how mortgage offset accounts work in Australia — the mechanics, interest saved, and how offset compares to other features — referenced from ASIC MoneySmart and the RBA.
A mortgage offset account is a transaction account linked to a home loan. Per ASIC MoneySmart, the balance held in the offset account reduces the amount of the loan that is charged interest. It is generally available with a variable-rate home loan and works like an everyday bank account.
ASIC MoneySmart — Offset AccountsInterest is calculated on the loan balance minus the offset balance. For example, per ASIC MoneySmart, on a AUD 500,000 loan with AUD 20,000 in the offset account, interest is charged on AUD 480,000. The higher the offset balance, the smaller the balance on which interest is charged.
ASIC MoneySmart — Offset AccountsNo. Per ASIC MoneySmart, money in an offset account does not earn interest. Instead, the benefit is the interest saved on the home loan, because interest is charged on a smaller balance.
ASIC MoneySmart — Offset AccountsYes. An offset account works like an everyday transaction account — funds can generally be deposited and withdrawn at any time, often with a linked debit card. Any amount withdrawn reduces the offset balance, which reduces the interest offset for that period. Access rules are set by the lender.
ASIC MoneySmart — Offset AccountsOffset accounts are generally available on variable-rate home loans. Most new owner-occupier loans in Australia are variable rate. Availability, eligibility, and any fees are set by the lender.
ASIC MoneySmart — Offset AccountsThe interest saved depends on the offset balance, the interest rate, and the loan term. A larger offset balance, a higher rate, or a longer remaining term generally increases the dollar amount saved, because interest is charged on a smaller balance for longer. Use the calculator above to estimate the interest saved for specific figures.
ASIC MoneySmart — Offset AccountsWhen repayments are held at the original level, a smaller interest charge means more of each repayment reduces the principal. Per ASIC MoneySmart, paying less interest over time means more goes towards the loan balance, which can help pay off the loan sooner. The calculator above models repayments held constant.
ASIC MoneySmart — Offset AccountsLenders generally calculate interest daily on the net balance (loan balance minus offset balance) and charge it monthly. The daily offset balance therefore matters — funds held in the account for more days of the month offset more interest. The exact method is set by the lender.
ASIC MoneySmart — Offset AccountsYes. Because interest is charged on the loan balance minus the offset balance, a higher offset balance reduces the interest-bearing amount and therefore the interest charged. The calculator above shows estimated interest saved at different offset balances.
ASIC MoneySmart — Offset AccountsPer ASIC MoneySmart, an offset account is a separate transaction account linked to the loan, and its balance reduces the interest charged. A redraw facility holds extra repayments made onto the loan, which can be withdrawn depending on the loan terms. Both can reduce interest, but they work differently and have different access rules.
ASIC MoneySmart — Offset AccountsThey are different. Extra repayments reduce the loan balance directly and are held inside the loan (often accessible via redraw). An offset balance is held in a separate linked account and reduces the interest charged while the funds remain there. Both reduce interest; the structure and access rules differ. Treatment is set by the lender.
ASIC MoneySmart — Offset AccountsA partial offset counts only a portion of the offset balance against the loan when interest is calculated, rather than the full balance. For example, a 50% offset with AUD 50,000 in the account offsets AUD 25,000 of the loan balance. A 100% (full) offset counts the entire balance. The calculator above models a full offset.
ASIC MoneySmart — Offset AccountsSome offset-eligible loans carry a higher interest rate or an annual package fee than loans without the feature. Per ASIC MoneySmart, lender fees, the interest rate, and access rules all affect the net benefit. The net benefit depends on whether the interest saved exceeds any additional rate or fee.
ASIC MoneySmart — Offset AccountsSome lenders allow multiple offset accounts linked to a single home loan, with the combined balances offsetting the loan. Whether multiple offsets are available, and any conditions or fees, are set by the lender.
ASIC MoneySmart — Offset AccountsFor investment loans, an offset account keeps savings separate from the loan balance, which can differ from redrawing extra repayments. The tax treatment of investment property borrowing depends on individual circumstances. The ATO publishes guidance on rental property loans and interest, and a registered tax agent can confirm the treatment for a specific situation.
ATO — Rental Property Interest ExpensesImportant Disclaimer
The Home Loan Offset Calculator and the accompanying guide, dashboard, updates, and FAQ on this page are provided by Money Snap for general informational and educational purposes only. They relate to mortgage offset accounts on Australian home loans and do not constitute a loan offer, a quote, or a recommendation about any product or lender.
The results are estimates generated from the figures entered and a simplified model that calculates interest monthly. The model assumes a constant interest rate and a constant repayment, applies a full (100%) offset, and excludes lender fees, charges, taxes, rate changes, and day-to-day movements in the offset balance. Actual interest charged, repayments, and loan term are determined by the lender and the specific loan contract, and will differ from these estimates.
Interest rates and official figures change over time. Rate context on this page references the Reserve Bank of Australia cash rate target and the RBA Housing Lending Rates series, and the description of how offset accounts work references ASIC MoneySmart. Figures are current as at the sources referenced and are subject to change without notice. Lenders set their own interest rates, fees, and offset eligibility.
This information is general only and does not take into account any individual's objectives, financial situation, or needs. It is not financial product advice, credit assistance, or tax advice. The relevant product disclosure statement, target market determination, and loan terms, together with independent licensed financial, credit, or tax advice, can assist in assessing individual circumstances. Tax treatment of investment-related borrowing depends on individual circumstances and is administered by the Australian Taxation Office.
While Money Snap takes care to use figures referenced from official sources, no warranty is given as to the accuracy, completeness, or currency of the information or calculations, and Money Snap accepts no liability for any loss or damage arising from reliance on this tool, to the extent permitted by law. Use of this calculator is subject to the Money Snap Terms of Use.
Official data sources
Rate sources: RBA Cash Rate and RBA Housing Lending Rates. Offset mechanics: ASIC MoneySmart. Interest-saved, repayment, and balance figures are illustrative estimates on a reference AUD 600,000 / 6.20% p.a. / 30-year loan, modelled monthly — not a quote.