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Mortgage Offset Calculator Australia

See exactly how much interest your offset account saves, how many years it cuts off your loan, and whether the offset fee is worth paying.

Last verified: June 2025  |  100% offset vs extra repayments | Break-even on account fees

🏠 Your Mortgage & Offset Details

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Park your salary in offset, pay bills from it — maximises offset benefit
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Some lenders charge $300-$500/year for offset accounts
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Fee break-even (months)

⚖️ No Offset vs With Offset vs Salary Parking

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How an Offset Account Saves You Money on Your Australian Mortgage

An offset account is one of the most powerful mortgage features available to Australian home owners. Every dollar you hold in the offset reduces the interest-bearing balance of your loan — saving you interest daily and shortening your loan term without locking funds away.

How Offset Accounts Work

Australian mortgages calculate interest daily on the outstanding loan balance. With a 100% offset account, the balance in your offset account is subtracted from the loan balance before interest is calculated. For example, a $520,000 loan with $50,000 in offset = $470,000 effective loan balance for interest purposes. At 6.2%, that saves approximately $3,100/year in interest.

The Salary Parking Strategy

The most effective way to use an offset is the "salary parking" strategy: deposit your entire salary into the offset account, then pay bills from it throughout the month. Your salary sits in the offset for as long as possible before being spent, maximising the daily offset balance and interest saving. This can add thousands of dollars in additional savings over the life of a loan with no extra effort.

Is an Offset Account Worth the Fee?

Many lenders charge $300–$500/year for an offset-enabled loan. Whether it's worth paying depends on your average offset balance. The break-even is simple: Fee ÷ Interest Rate = Minimum Offset Balance needed to justify the fee. At $395/year and 6.2%, you need at least $395/0.062 = $6,371 average offset balance for the fee to pay for itself. Most borrowers with a reasonable savings buffer exceed this easily.

Calculations assume consistent offset balance and interest rate. Actual savings depend on your usage pattern. Not financial advice.

Frequently Asked Questions

How much does an offset account save in Australia?
A $50,000 offset account on a $500,000 mortgage at 6.2% p.a. saves approximately $3,100/year in interest. Over a 25-year loan, the compound saving can exceed $80,000 and cut 3–5 years off the loan term. The more you hold in offset and the higher the interest rate, the greater the saving.
Offset account vs making extra repayments — which is better?
Both reduce interest identically for the same amount. The key difference is flexibility: funds in an offset are accessible at any time, while extra repayments to a principal and interest loan may be difficult to redraw. An offset is generally preferred unless your lender charges a high offset fee that outweighs the benefit.
What is the salary parking strategy for mortgages?
Deposit your entire pay into your offset account each payday, and pay all bills from the offset throughout the month. The salary sits in the offset reducing your loan balance — and therefore your daily interest — until spent. Even with average spending, this typically adds thousands in extra interest savings per year.

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