Model a steady offset balance against a loan
An offset account can reduce the portion of a home-loan balance on which interest is calculated, subject to the product terms. This calculator holds the entered offset balance constant and compares that schedule with a loan that has no offset balance.
Real offset balances move with income and spending, and lenders may calculate interest daily rather than in the monthly model used here. Check whether the account is a full or partial offset, whether package fees apply, and which loan split the account can offset. Money held in an offset remains accessible, unlike an extra repayment, but access and transaction conditions are product-specific.
How to read the results
Potential interest saved is the difference between the modelled no-offset interest and offset interest. Potential term is the number of monthly payments needed when the regular repayment is held at the original scheduled amount.
Offset interest is interest charged in the offset schedule, not interest earned in the bank account. Offset balance records the amount entered. The projected balance chart uses the steady balance assumption and should not be read as an account forecast.
Worked example
For a $650,000 loan at 6.34% over 30 years with a constant $50,000 offset balance, the regular repayment used is $4,040.29 per month. The calculator estimates 304 monthly payments rather than the original 360-month schedule.
It returns potential interest saved of $227,362 and offset interest of $577,141. These figures assume the $50,000 remains available in the eligible offset account throughout.
If the offset balance falls, the interest saving and shortened term shown here would both be lower.
Assumptions and limitations
- The offset balance remains unchanged every month.
- The loan rate and scheduled repayment remain constant.
- Interest is modelled monthly on the loan balance less the offset balance, never below zero.
- Offset account fees, package fees, transaction activity and taxation are excluded.
- The calculation assumes the account offsets the full entered loan balance rather than a capped or partial portion.
Frequently asked questions
Does an offset reduce the loan principal?
No. It generally reduces interest calculated while funds remain in the eligible account; the loan balance is still repaid through repayments.
Why might my lender show a different saving?
Daily interest calculations, changing balances, fees and product rules can differ from this constant monthly model.
Can an offset balance exceed the loan balance?
The model does not charge negative interest; product treatment of surplus funds depends on the account terms.
This calculator and supporting information provide general estimates only. They do not take account of every product rule, tax consequence or personal circumstance and are not financial, tax, credit or legal advice.