How to Calculate a Mortgage Buffer in Australia

Short answer

A mortgage buffer is accessible money set aside to cover repayments or essential household costs if income falls or expenses rise.

Two calculations answer different questions:

1. Mortgage-only months = accessible buffer divided by the scheduled monthly mortgage repayment.
2. Essential-expense months = accessible buffer divided by total essential monthly outgoings, including the mortgage.

The second measure is usually more informative because a household still needs to pay for food, utilities, insurance, transport and other essentials during an income interruption.

There is no universal number of months that is suitable for every household. Income stability, dependants, insurance, leave, loan terms, access rules and other debts all matter. This page is a worksheet, not a recommendation or hardship assessment.

Step 1: work out what is genuinely accessible

Start with money that could be used when needed, then label where it sits.

ASIC Moneysmart distinguishes an offset account from redraw. An offset is a separate transaction account linked to the mortgage. Redraw is access that may be available for extra payments already made into the loan, subject to the loan terms.

Do not count the same money twice. If a savings balance is held in the offset account, it is one buffer source, not both savings and offset.

Step 2: calculate the scheduled mortgage amount

Use the current minimum repayment from the lender account or notice. If you voluntarily pay more, record both figures:

• scheduled minimum repayment; and
• amount actually paid.

The minimum shows the current contractual cash requirement. The actual payment shows the household's present cash flow. They can differ if the borrower is paying ahead.

Use the Mortgage Repayment Calculator to reproduce an indicative scheduled amount from the balance, rate and remaining term. Treat any difference from the lender's figure as a prompt to check assumptions.

Step 3: add essential non-mortgage outgoings

Use a recent bank-statement period rather than a rough guess. Common items include:

• food and household supplies;
• electricity, gas, water, phone and internet;
• council rates, strata and essential property insurance;
• transport and required vehicle costs;
• health costs and insurance;
• minimum repayments on other debts;
• childcare, school and dependant costs; and
• essential maintenance or recurring commitments.

Keep discretionary spending separate so it is clear what has been excluded. Also note annual bills that need to be converted to a monthly amount.

Worked example

Assume a household records:

First calculate using only the offset, because the household has not yet checked the redraw terms.

Mortgage-only cover

$24,000 divided by $3,600 = 6.7 months

Essential-expense cover

Total essential outgoings are $3,600 plus $2,800, or $6,400 a month.

$24,000 divided by $6,400 = 3.75 months

The same $24,000 therefore represents 6.7 months of mortgage payments but only 3.75 months of total essential outgoings.

If the lender confirms that the $10,000 redraw is available on acceptable terms, the household can record a second scenario using $34,000. It should still keep the offset and redraw amounts separate in the worksheet because their access conditions differ.

Test a changed repayment separately

A buffer measured against today's repayment can shrink if the loan rate rises.

Use the Rate Change Impact Calculator to estimate a higher repayment, then replace the mortgage line in the essential-expense calculation. Do not assume the RBA cash rate is the mortgage rate or that a particular future change will occur.

For a variable loan, check the lender notice for the new rate, effective date and minimum payment. For a fixed loan, record the fixed-period end date and the confirmed revert-rate information when it becomes available.

What the RBA data do and do not show

The RBA's August 2026 Statement on Monetary Policy said many borrowers held sizeable mortgage pre-payment buffers. It reported that, in aggregate data to June, the median variable-rate owner-occupier borrower in the lowest income quartile could cover almost one year of scheduled mortgage repayments using offset and redraw funds.

That figure is not a target and does not describe every borrower. A median hides the range above and below it. It also measures scheduled mortgage payments, not the household's food, utilities, insurance and other essential costs.

Read the August RBA minutes update for the Board's separate discussion of scheduled payments, new housing lending and the decision to hold at 4.35%.

A practical record to keep

Review these fields after a rate change, refinance, offset change or major household change:

1. Current loan balance.
2. Current retail loan rate.
3. Scheduled minimum repayment and frequency.
4. Actual repayment or direct debit.
5. Accessible cash and savings.
6. Offset balance and confirmation that it is linked.
7. Available redraw and access rules.
8. Essential monthly outgoings.
9. Annual bills converted to monthly amounts.
10. Dates when fixed rates, insurance or other major costs change.

If the calculation shows that a payment may be missed, contact the lender early. The missed mortgage repayment guide covers hardship requests, response timing and free financial counselling.

Limitations

• An offset balance changes as money enters and leaves the account.
• Redraw access depends on the loan terms and lender processes.
• Future rates, repayments, income and essential expenses are uncertain.
• Insurance may have waiting periods, exclusions and claim conditions.
• A buffer calculation does not decide whether to refinance, use redraw or change a loan.
• Using buffer money reduces the remaining cover and may affect interest charged.

Sources

• ASIC Moneysmart: Mortgage offset accounts, including offset, redraw and account-linking guidance. Updated 28 July 2026 and checked 26 August 2026.
• ASIC Moneysmart: Save for an emergency fund, including the essential-expense method and use of an offset account. Checked 26 August 2026.
• RBA: August 2026 Statement on Monetary Policy, Financial Conditions, including aggregate scheduled-payment and pre-payment-buffer data. Checked 26 August 2026.
• ASIC Moneysmart: Problems paying your mortgage, including early hardship contact guidance. Updated 18 June 2026 and checked 26 August 2026.

General information disclaimer

This guide provides general information and an indicative worksheet only. It is not financial advice, credit advice, a lender assessment, a hardship decision or a recommendation about how much cash to hold or whether to use offset or redraw funds. Access rules, rates, costs and household needs vary. Check the loan terms and speak with the lender or an appropriately licensed professional where needed.

Last updated: 26 August 2026.