Offset Account vs Extra Repayments Calculator

An offset account is a transaction account linked to your home loan. The balance in the offset account is deducted from your loan balance when calculating interest. For example, if you owe $500,000 and have $50,000 in offset, you only pay interest on $450,000.

If the amounts are identical and there are no fees, both strategies reduce the interest you pay by the same amount. The key difference is that offset preserves your access to cash — you can withdraw it anytime — while extra repayments reduce your loan principal and may require a redraw facility to access.

For investment properties, both strategies leave you with the same interest deduction when the dollars and fees match — interest that isn't charged can't be deducted, so offset doesn't create any extra deduction. The real difference shows up later: an extra repayment permanently reduces the loan's deductible principal, and if you ever redraw that cash for a private purpose, the interest on the new borrowing is not deductible (ATO TR 2000/2 describes a redraw as, in effect, a new borrowing of funds). Cash sitting in an offset account is your own money — withdrawing it doesn't touch the loan balance or its deductible principal at all.

It depends on how much spare cash you have and your interest rate. If you only have a small amount in offset (e.g., $5,000), the monthly fee may outweigh the interest saving. This calculator factors in the fees so you can see the net benefit.

Yes. Many borrowers use an offset for their everyday banking (keeping liquidity) while also making small extra repayments. For investment properties, using only the offset avoids a specific later risk: because offset never reduces the loan's deductible principal, there is no redraw to worry about. Extra repayments on an investment loan are still fine — just keep in mind that if you later redraw that cash for a private purpose, the interest on it stops being deductible.

An offset account does not change your minimum monthly repayment. You continue to pay the same amount, but because less interest is charged, more of each payment goes toward reducing the principal. This is why offset accounts help you pay off your loan faster.

Your interest charge increases because the offset balance is lower. This is one of the key advantages of offset over extra repayments — you have full liquidity. With extra repayments, accessing your money requires a redraw, which may have restrictions or fees.

A 100% offset means every dollar in the account offsets your loan dollar-for-dollar. A partial offset only offsets a percentage (e.g., 40%). Most major Australian lenders offer 100% offset accounts, which provide the full interest-saving benefit. This calculator assumes a 100% offset.