Home Loan Calculator with Offset Account and Extra Payments
How much interest and time an offset balance and extra monthly payments cut from a home loan, month by month.
Inputs
| Year | Principal paid | Interest paid | Balance |
|---|---|---|---|
| 1 | $7,724 | $21,223 | $342,276 |
| 2 | $8,242 | $20,705 | $334,034 |
| 3 | $8,794 | $20,153 | $325,241 |
| 4 | $9,382 | $19,564 | $315,858 |
| 5 | $10,011 | $18,936 | $305,847 |
- Interest saved
- $173,138
- Months saved
- 101
- Total interest (with offset/extra)
- $273,268
- Total interest (baseline)
- $446,406
- Loan cleared in
- 259 months
- Interest is charged on outstanding balance minus offset amount each month.
- Extra payments reduce principal directly on top of the scheduled EMI.
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What each Home Loan with Offset Account and Extra Payments input means
- Loan amount
- The amount borrowed.
- Interest rate (annual)
- The loan's yearly interest rate.
- Tenure
- The loan term in months: 360 for 30 years, 240 for 20.
- Offset account balance
- Savings held in a linked offset account. Interest is charged on the loan balance minus this amount. Leave at 0 if you have none.
- Extra monthly payment
- Anything you pay each month on top of the instalment, which goes straight to principal. Leave at 0 for none.
Home Loan with Offset Account and Extra Payments formula
EMI = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), r = annual rate ÷ 12 · each month: interest = (balance − offset) × r; balance falls by EMI − interest + extra payment
A home loan is repaid in equal instalments, each of which is interest on what is still owed plus a slice of principal; because the balance falls, the interest part shrinks every month and the principal part grows, which is why early payments barely dent the debt. Anything that lowers the balance the interest is charged on saves interest for every remaining month. An offset account does it without repaying: savings parked with the lender are subtracted from the balance before interest is charged, so {{$20000}} in offset on a 6.5% loan saves the same interest as {{$20000}} repaid, while staying available. An extra monthly payment reduces the balance itself. The page runs the loan month by month with both applied, keeps the scheduled instalment unchanged, and reports the interest saved, the months cut and the new payoff date against the plain schedule.
Home Loan with Offset Account and Extra Payments worked example
A $350,000 loan at 6.5% over 30 years has a monthly instalment of $2,212 and, paid as scheduled, costs about $446,400 in interest. With $20,000 sitting in an offset account and $200 extra paid every month, the interest charged each month is lower from the first payment and the balance falls faster: the loan clears 101 months early — over eight years — and the interest bill drops by about $173,000, to roughly $273,000. Most of that saving comes from the early years, when the balance is largest.
More Home Loan with Offset Account and Extra Payments examples
A $300,000 loan at 6.5% over 30 years has an instalment of $1,896. Paying $100 a month extra clears it in 312 months instead of 360 — four years sooner — and saves about $61,000 in interest.
Where the Home Loan with Offset Account and Extra Payments calculator can give the wrong answer
- The offset balance is assumed constant for the whole loan. Real offset balances rise and fall with your spending; the saving scales with the average balance over time.
- The scheduled instalment stays the same, so extra payments shorten the term rather than lowering the payment. Lenders sometimes re-amortise instead — a smaller instalment over the original term — which saves less interest.
- Fixed rate throughout. A variable loan that resets changes every later month; re-run with the new rate from that point.
- Offset accounts usually cost a higher rate or an annual fee, and the interest they save is not taxed while interest a savings account earns is. Whether an offset beats a separate savings account depends on those two things, which the page does not know.
- Prepayment penalties, redraw fees and loans that cap the extra you may pay each year are not modelled.
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Home Loan with Offset Account and Extra Payments FAQ
- The lender charges interest on the loan balance minus the money in the offset account, every day or every month. {{$20000}} offset against a {{$350000}} loan at 6.5% saves {{$20000}} × 6.5% = {{$1300}} of interest in the first year, and the saving repeats every year the balance stays there — while the money remains yours to withdraw.
- Both save the same interest per dollar while the money is there. Extra repayments are permanent and cannot be spent later; offset money can. Keep an emergency fund in offset and put money you will never need back into repayments — and check whether your lender charges more for an offset facility.
- It depends on the rate and how early you start. On a {{$350000}} 30-year loan at 6.5%, {{$200}} a month on its own cuts 74 months — over six years — and about {{$108000}} of interest; the {{$20000}} offset on its own cuts 45 months and about {{$100000}}. Enter your own loan and the page gives the exact months and interest.
- Because the page keeps the contractual instalment and lets the extra shorten the loan, which is how most offset and redraw loans work and what saves the most interest. If your lender re-calculates a lower instalment instead, the term stays the same and the saving is smaller.