Offset Mortgage Calculator
Interest saved by parking savings in an offset account
Calculate offset mortgage interest savings. See years saved and total interest reduced by offset balance. Enter mortgage balance to size affordability.
What this tool does
This calculator models how an offset account reduces mortgage interest charges over time. Enter your mortgage principal, interest rate, loan term, and the balance you typically hold in an offset account. The tool simulates month-by-month amortisation, calculating interest on the net balance after offsetting, then compares this to a standard mortgage without offset. The result shows the total interest saved in your currency and estimates how many years the offset arrangement shortens your loan repayment period. The calculation assumes a consistent offset balance and standard monthly payments. Results are illustrative only and reflect the mechanics of offset accounts under the stated conditions; actual savings depend on how your offset balance changes over time and on your lender's specific terms.
Quick answer: with the default values, the result is $194,606.16 (Interest Saved by Offset). Adjust the values below for your own figures.
Enter Values
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Formula Used
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
How Offset Accounts Work
An offset account sits alongside the mortgage. Interest is charged on the mortgage balance minus the offset balance. A mortgage of 500,000 in your chosen currency, with 50,000 held in offset, is charged interest on the remaining 450,000 — the monthly payment is the same, but more goes to principal. The offset balance stays available as regular savings.
Offset Accounts vs Extra Principal Payments
Extra principal payment locks money into the mortgage permanently. Offset reduces interest charged while keeping the money accessible. Both produce functionally equivalent interest savings, but offset preserves liquidity. Trade-off: offset mortgage rates are sometimes slightly higher than standard rates.
A worked example
As a worked example, a mortgage balance of 500,000 at an interest rate of 6% over a 30-year term with a 50,000 offset balance projects 194,606.16 in interest savings. Your own figures update the result as you type.
The levers in this calculation
The inputs — Mortgage Balance, Interest Rate, Term, and Typical Offset Balance — do not pull with equal force.
How the math works
Simulates amortisation month-by-month with standard monthly payment. Interest each month is charged on max(0, balance minus offset). Compares to the standard amortisation without offset to calculate savings. Assumes offset balance held constant. Results are estimates for illustration purposes only.
Testing at different rates
Running the calculation at a rate 2–3 percentage points higher indicates roughly what a rate change at renewal could bring — a view of how different rate scenarios affect the result rather than only today's rate.
Offset estimate indicates $194,606.16 total interest saved, with the loan cleared sooner (5.3 yrs).
Inputs
| Monthly Payment (unchanged) | $2,997.75 |
|---|---|
| Net Balance After Offset | $450,000.00 |
| Years Saved | 5.3 yrs |
| Offset Balance | $50,000.00 |
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator simulates a month-by-month amortisation schedule under two scenarios: a standard mortgage and an offset mortgage. For the standard mortgage, monthly interest is computed on the full outstanding balance. For the offset mortgage, the monthly interest charge applies only to the difference between the mortgage balance and the offset balance held (or zero if offset exceeds mortgage balance). The calculator assumes the offset balance remains constant throughout the term and applies a fixed interest rate. It then compares total interest paid across both scenarios to derive the interest saved. The model does not account for fees, early repayment, changes in interest rates, variations in offset balance over time, or tax treatment of savings. Results are estimates for illustration purposes and reflect the mechanical effect of reducing the interest-bearing balance by the offset amount.
Frequently Asked Questions
Is an offset account better than extra payment?
Do offset mortgages cost more?
Can I have multiple offset accounts?
What about partial offset?
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