Try a different situation
Where is your offset break-even?
Start with this example, then change the inputs below. Compare a $600,000 loan at 6% without an offset with a 6.2% offset loan. Keep an average $40,000 in a full offset and allow $395 in extra annual fees.
First-year illustration · constant balances
- Interest avoided
- $2,480
- Extra costs
- $1,595
- Estimated net saving
- $885
$40,000 × 6.2%.
$1,200 rate premium + $395 fees.
Interest avoided, less both extra costs.
At these balances, the offset saves about $885 a year after the extra rate and fees. Break-even average offset balance: $25,726.
A starting comparison, not the calculator’s amortising schedule. Balances and rates stay fixed; refinancing costs and alternative savings returns are excluded. Use the average money actually held in the offset, not its highest balance.
This comparison stays in this browser. Nothing is submitted or saved.
With $600,000 owed and $40,000 in a full offset, what is your actual debt?
Read the full guide6 min · Examples, assumptions and what to check
First separate your debt from your cash
With a $600,000 loan and $40,000 in a full offset, the interest calculation uses $560,000. You still owe $600,000. The cash has not been paid into the loan: it is held separately. If you spend $10,000 from the offset, the amount charged interest increases to $570,000, before any repayments.
This is different from paying an extra $40,000 directly into the loan. An extra repayment reduces the debt. Getting that money back through redraw depends on the loan’s terms. The two approaches can create similar interest reductions while leaving you with different access arrangements.
Compare the whole loan, not the offset in isolation
Our hypothetical basic loan charges 6%. Its full-offset alternative charges 6.2% and has $395 more in annual fees. On an unchanged $600,000 loan, that 0.2 percentage-point premium costs $1,200 a year. Notice that the premium applies to the loan; it is not 0.2% of the offset cash.
The $40,000 offset avoids $2,480 in annual interest at 6.2%. Subtract $1,200 and $395 to get an estimated $885 net saving. The offset helps in this example, but the full $2,480 is not the saving after costs. Using the wrong base loan for the comparison would make the benefit look too large.
Find the break-even balance
First add the extra costs: $1,200 higher-rate interest plus $395 fees equals $1,595. Divide that by the offset loan’s decimal rate, 0.062. The break-even average offset balance is approximately $25,726. Above this amount, the simple model saves money; below it, the added costs are larger than the offset benefit.
If the offset loan has exactly the same rate and only the $395 additional fee, the calculation becomes $395 ÷ 0.06, approximately $6,583. Change the premium to zero in the comparison to see the difference. Small differences in the rate can matter when they apply to a large debt.
Why the average matters more than payday
Suppose your offset has $40,000 immediately after a transfer but falls to $10,000 while you pay bills. Entering $40,000 as though it stays there all year overstates the benefit. Use account records to estimate the money normally held there. Daily balances are more useful than a single screenshot.
Our comparison holds the loan and offset balances fixed for a year so you can see the cost of the feature. A real principal-and-interest loan declines with repayments, rates can change, and your cash balance moves. Use the mortgage calculator to examine a repayment schedule, then compare actual loan quotes and charges. Its schedule excludes the fees illustrated here.
Check what is included in the offer
Ask the lender whether the offset is 100% or partial, which part of the loan it covers, and whether the quoted rate requires a package. Include any extra annual or account fees. If changing lenders, add one-off switching costs separately; an apparent annual saving may take time to recover them.
This worksheet compares only loan interest and additional fees. It does not compare interest your cash could earn elsewhere, tax consequences, investment loans, loan approval or your need for accessible emergency cash. Those questions can change a decision. Take the provider’s written terms and your own circumstances into account before changing an arrangement.
Sources & update record
30 September 2026: published an original Howloop worked comparison and adjustable example. Read the linked ASIC Moneysmart guidance; independently checked the example arithmetic. This is general education, not an assessment of personal eligibility.
Published 30 Sept 2026 · Updated 30 Sept 2026. These dates do not guarantee rules are unchanged.
Published by Howloop. AI assists preparation. This lesson has not been reviewed by a licensed financial adviser. How we check our content