How Much Does a $50,000 Offset Save on a $600k Loan?

The short answer

Holding a constant $50,000 in a 100% offset account against a $600,000 home loan at 6.0% p.a. over 30 years saves roughly $200,000 in interest and clears the loan about 4-5 years early. The mechanism is simple: an offset balance is subtracted from your loan before daily interest is calculated, so $50,000 in offset means you're only charged interest on $550,000. That works out to about $3,000 less interest in year one alone, and the saving compounds as the loan shrinks. The exact figure depends on your rate and how long the money actually stays put.

How an offset account works

An offset account is an everyday transaction account linked to your home loan. Each day, your lender subtracts the offset balance from your loan balance and charges interest only on the difference. According to Moneysmart, with a $500,000 loan and $20,000 in offset you pay interest on just $480,000.

Crucially, your repayment usually stays the same. Because less of each repayment goes to interest, more goes to principal, so the loan is paid off faster. You also keep full access to the cash. Unlike extra repayments, money in an offset can be withdrawn any time (see offset account vs redraw).

A few Australian specifics worth knowing:

• The benefit equals your loan interest rate, tax-free. A $50,000 offset at 6% effectively "earns" $3,000 a year you don't pay, and unlike savings interest, it isn't taxable income.
• Offset only helps if the account holds money. An empty offset saves nothing.
• Some lenders charge a package or annual fee for offset, or a slightly higher rate. Moneysmart suggests weighing those costs against the interest saved.
• A "partial" or "85% offset" doesn't offset the full balance, so confirm yours is a 100% offset.

A worked example

Take a typical owner-occupier loan. Variable owner-occupier rates in 2025-26 have sat broadly in the high-5% to low-6% range per the RBA's lenders' rates data, so we'll use 6.0% p.a. over a 30-year term, principal & interest.

	No offset	$50,000 offset (held constant)
Loan amount	$600,000	$600,000
Interest charged on	$600,000	$550,000
Monthly repayment	$3,597	$3,597 (unchanged)
Total interest paid	~$695,000	~$493,000
Time to repay	30 years	~25 years 4 months
Interest saved	—	~$202,000
Time saved	—	~4 years 8 months

The mechanics: in month one, the no-offset loan accrues $600,000 × 6% ÷ 12 = $3,000 interest. With $50,000 offset, interest is $550,000 × 6% ÷ 12 = $2,750, a $250 saving that month. Because the repayment is unchanged, that extra $250 knocks down the principal, so next month's interest is lower still, and the gap widens over time.

Two honest caveats:

• This assumes the full $50,000 stays in offset for the entire loan. Real offset balances rise and fall as you spend, and Moneysmart's pay-off-faster guide notes the saving depends on how much you keep in there and for how long. If your average balance is $20,000, scale the saving down accordingly.
• A higher rate makes offset more valuable; a lower rate, less. At 5.5% the lifetime saving is smaller; at 6.5%, larger.

For context on the un-offset figure, see total interest on a $600k loan over 30 years.

Model this in True Loan

You can test your own numbers in seconds with the free, no-login calculator at trueloan.app:

1. Set the loan amount ($600,000), interest rate (your actual rate), and term (e.g. 30 years).
2. Choose your repayment frequency: monthly, or true-periodic fortnightly/weekly. Paying fortnightly stacks an extra benefit on top of offset (see weekly vs fortnightly vs monthly repayments).
3. Add your offset/redraw balance ($50,000) to see remaining debt, total interest and the new payoff date update instantly.
4. Watch the timeline for remaining debt, projected equity and LVR over the years.

Want to compare offset against, say, making extra repayments or choosing a different term? Use the side-by-side tool at trueloan.app/compare, where every scenario is shareable via URL. The related guide on offset vs extra repayments explains when each wins.

Common questions and mistakes

Does an offset lower my repayment? Usually no. It shortens the loan term instead, because the repayment stays fixed and more of it pays down principal. Some lenders can recalculate to a lower repayment on request, but that forgoes the time saving.

Is offset better than just putting the money in the loan (redraw)? Financially the interest saving is identical dollar-for-dollar; the difference is access and tax treatment of the surrounding accounts. See offset account vs redraw.

Will I earn interest on the offset balance? No. You don't earn interest, you avoid paying it, which is effectively a tax-free return equal to your loan rate.

Does a small offset matter? Yes. Even $10,000 sitting in offset saves real interest every day it's there. The saving simply scales with the average balance.

Common mistake: assuming the full saving applies even when the account is often near empty. Offset rewards a consistently high balance.

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Figures here are estimates for the 2025-26 financial year and depend on your rate, balance and lender's terms. This is general information, not financial or credit advice. Check your loan contract and official sources such as Moneysmart before making decisions.