Every dollar in offset earns your mortgage rate, tax-free
Offset Calculator - interest saved, years cut
What your offset balance, regular savings and extra repayments actually do to the loan - and why investors should usually park cash in the offset rather than pay the loan down.
Your loan & savings
Interest saved over the loan
$403,677
vs $693,641 with no offset - and the loan finishes 9 yrs 4 mo early.
Paid off in
20 yrs 8 mo
Without offset
30 yrs
With vs without the offset, year by year
100% offset from 15 yrs 3 mo: from this point your offset balance covers the entire remaining loan, so interest stops accruing altogether - every repayment goes straight to principal, while the cash stays yours to withdraw.
Investor note: paying down an investment loan and redrawing later can permanently shrink the deductible portion of your interest. Cash in the offset saves the same interest while preserving the loan balance - and its deductibility under your negative gearing treatment. Confirm structure with your accountant.
The offset settles the loan question. The full audit models the whole deal around it - costs, tax, ten years and a sale.
Deal Auditor - in build, not yet available
Why the offset is the investor's default
An offset account nets your savings against your loan balance before interest is charged. The arithmetic is identical to making extra repayments - but the cash stays yours to withdraw, and for investment loans the tax treatment differs sharply. Interest deductibility follows the purpose of the borrowing: pay the loan down and redraw for a holiday, and that redrawn slice is no longer deductible. Park the same cash in the offset instead and the loan - and its deductible interest - is untouched, while you still avoid exactly the same interest.
The numbers compound quickly: $50,000 sitting against a $600,000 loan at today's rates saves six figures of interest and years of payments over the term. How that interacts with rent, tax and the 10-year picture on a specific property is what the Deal Auditor models end to end.
Frequently asked questions
How does an offset account actually save interest?
Interest is charged monthly on your loan balance minus your offset balance. Money sitting in the offset works exactly like earning your mortgage rate, tax-free, while staying available to withdraw. With the repayment held constant, the interest you avoid goes to principal instead, so the loan finishes years early.
Offset account or extra repayments - which is better?
Mathematically they save similar interest. The differences are flexibility and tax. Offset money can be withdrawn any time without touching the loan. For investors the tax point is decisive: paying down the loan and later redrawing for personal use can permanently reduce the deductible portion of the loan, whereas parking cash in an offset preserves the full loan balance and its deductibility. Investors should generally prefer the offset - confirm with your accountant.
Is offset interest saved really tax-free?
Yes in effect - you are not earning taxable interest, you are avoiding interest. Avoiding 5.99% on your mortgage is equivalent to earning roughly 9% before tax at a 37% marginal rate, which is why an offset usually beats a savings account holding the same cash.
What happens when my offset balance equals the loan?
You are 100% offset: interest stops accruing entirely, and every repayment from that point goes straight to principal. The loan still runs until the balance itself reaches zero, but it costs you nothing more in interest - and the offset cash remains yours to withdraw at any time. This calculator marks the month that happens on the chart.
Does an offset work with interest-only loans?
Yes - the offset reduces the balance interest is charged on, so it directly cuts the IO payment itself. Many investors pair an IO loan with a large offset for maximum flexibility: the structure behaves like a lower-balance loan while preserving both the deductible loan amount and access to the cash.