Understanding Extra Repayments & Offset — A Complete Guide

Overview

Paying more than the minimum and holding cash in an offset account both reduce the effective principal you pay interest on, which lowers interest charges and shortens your loan. Small, consistent extras compound into large savings over time because every dollar paid early stops interest from accruing on that dollar for the rest of the term. Offset accounts provide flexibility by keeping cash accessible while still reducing interest, whereas permanent extra repayments immediately cut the balance. This guide shows the trade‑offs, demonstrates the impact of timing, and provides a calculator to model weekly/fortnightly/monthly strategies.

How extra repayments work

• Small weekly/fortnightly/monthly extras reduce principal sooner.\
• Less principal → less interest charged → faster payoff.

Lump‑sum payments

One‑off payments (e.g., bonuses) immediately cut the balance and lifetime interest. Timing matters — earlier is usually better.

Offset accounts

An offset links a transaction account to your loan. Money in the offset reduces the balance used to calculate interest.

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Model savings with the Extra Repayments & Offset Calculator.

Sources

• ASIC Moneysmart — Making extra repayments: https://moneysmart.gov.au
• RBA — Housing lending insights: https://www.rba.gov.au