Every dollar in your offset cuts the interest on your loan. See how much.
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An offset account is a transaction account linked to your home loan. Its balance is subtracted from the loan before interest is calculated, but the money stays yours to use.
Keeping repayments the same, the interest saved goes straight to paying off the loan, so you finish years early. Saving at your mortgage rate is like earning that rate tax-free.
| Loan balance | 600,000 $ |
| Interest rate | 6% |
| Years remaining | 30 years |
| Offset balance | 50,000 $ |
| Added to offset each month | 500 $ |
| Interest saved | $331,329 |
| Loan paid off | 22.3 years (7.7 years sooner) |
| Monthly repayment (unchanged) | $3,597.30 |
| Interest without offset | $695,029 |
| Interest with offset | $363,700 |
| First-month saving | $250.00 |
$331,329.
| Loan balance | 400,000 $ |
| Interest rate | 6% |
| Years remaining | 30 years |
| Offset balance | 20,000 $ |
| Added to offset each month | 0 $ |
| Interest saved | $87,730 |
| Loan paid off | 27 years (3 years sooner) |
| Monthly repayment (unchanged) | $2,398.20 |
| Interest without offset | $463,353 |
| Interest with offset | $375,623 |
| First-month saving | $100.00 |
$87,730.
Usually yes if you keep a decent balance (often $10,000+), since it saves interest at your loan rate without tax.
Both save the same interest. Offset money is clearly yours and easier to access; redraw can be restricted and matters for tax on investment loans.
Normally no — repayments stay the same and the loan is paid off faster.
No, you are not earning interest, you are saving it.