Offset Account vs Savings Account: How Much an Offset Really Saves
$50,000 in offset on a $600,000 loan at 6% saves about $202,175 in interest. Why an offset usually beats a savings account, and when it doesn't.
By the MoneyBackKit AU team · Updated 16 October 2026 · 5 min read
If you have a home loan and some savings, the question comes up sooner or later: should the money sit in a high-interest savings account, or in an offset account linked to the loan? For most people the offset wins, and by more than they expect, because the “interest” you save isn't taxed.
How an offset works
Money in an offset account reduces the balance you're charged interest on. With $600,000 owing and $50,000 in offset, you pay interest on $550,000. Your repayment stays the same, so the interest you save goes straight into paying the loan down faster.
What a lump sum in offset saves
| Kept in offset | Interest saved | Loan paid off sooner by |
|---|---|---|
| $10,000 | $47,981 | 1 yrs 1 mo |
| $30,000 | $131,594 | 3 yrs |
| $50,000 | $202,175 | 4 yrs 8 mo |
| $100,000 | $338,658 | 7 yrs 10 mo |
Interest saved over the loan
And if you start with $20,000 and add $1,000 a month, the saving grows to about $356,561, with the loan finished 8 yrs 3 mo early.
Offset vs savings account
- A savings account paying 4.5% is really paying about 3.1% after tax if your marginal rate is 32%.
- An offset on a 6% loan “earns” the full 6%, tax-free.
- Your money is still available any time, unlike extra repayments into some loans.
When an offset isn't worth it
- If it comes with a package fee (often a few hundred dollars a year) and you only keep a small balance.
- If the loan with the offset has a noticeably higher rate than one without.
- If you won't actually keep money in it. A redraw facility can give similar savings for less, as long as you understand the redraw rules.