How is the offset break-even balance calculated?

The estimate adds the annual package fee to any annual cost from a higher offset-loan rate, then divides that cost by the effective offset saving rate. A partial offset reduces the saving rate used in the calculation.

Why compare the offset loan with a basic loan rate?

An offset feature can sit on a loan with a different rate or annual fee. Comparing only the fee can overstate the value if a similar basic loan has a lower rate. Use current written product rates for a like-for-like comparison.

Should I enter my current offset balance or an average?

Use a realistic average balance over the year. Lenders commonly calculate interest daily, so a balance that appears for only a few days will not produce a full year of savings.

Does the calculator include tax?

No. It compares loan interest and entered product costs only. Tax treatment depends on the loan purpose, account use and personal circumstances. Speak with a registered tax professional where relevant.

Offset Account Break-Even Calculator Australia

What this calculator answers

An offset account may reduce mortgage interest, but the loan can also have an annual package fee or a higher rate than a comparable basic loan. This tool puts those three figures in one annual comparison.

It does not decide whether a loan is suitable. Account access, fees, offset percentage, repayment rules and rates vary by lender and product.

Methodology

Estimated annual offset saving = effective average offset balance x offset loan rate.

Estimated annual rate premium cost = loan balance x any positive difference between the offset and basic loan rates.

Break-even balance = annual fee and rate premium cost divided by the effective offset saving rate.

The effective offset balance cannot exceed the loan balance. A 40% partial offset applies 40% of the entered average balance to the interest-saving estimate.

Worked example

Assume a $600,000 loan, a $25,000 average balance in a 100% offset, a 6.25% offset-loan rate, a 6.15% comparable basic-loan rate and a $395 annual package fee.

Offset interest saving: about $1,563 a year.
Cost of the 0.10 percentage-point rate premium: about $600 a year.
Annual fee: $395.
Indicative net benefit: about $568 a year.
Average break-even offset balance: about $15,920.

Actual interest is usually calculated daily and charged monthly. Use the balance you expect to maintain, not a payday peak or a one-off transfer.

Checks before comparing products

Confirm whether the account is a 100% offset or partial offset.
Check which fixed or variable loan portions the account offsets.
Include annual, monthly and transaction fees that apply to the product.
Compare a genuinely similar basic loan, including repayment type and loan-to-value ratio.
Check whether the lender can change the rate, fee or offset terms.

Related calculators and guides

Extra Repayments and Offset Calculator for a longer-term amortisation estimate.
Loan Comparison Calculator for repayment, interest and fee comparisons.
Offset Account vs Redraw for access, contract and record-keeping differences.

Sources

ASIC Moneysmart: Mortgage offset accounts, updated 20 July 2026 and checked 22 July 2026.
Reserve Bank of Australia: Developments in Banks' Funding Costs and Lending Rates, May 2026 and checked 22 July 2026.

Limitations

This is a one-year simple-interest comparison. It does not model daily balance movements, amortisation, redraw, repayments, future rate changes, tax, serviceability, eligibility or the value of unrelated package features. It is not a quote, credit assessment, approval or recommendation.