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Offset Account Savings Formula:
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An offset account is a transaction account linked to your home loan. The balance in this account is offset against your outstanding loan balance, reducing the interest you pay while maintaining access to your funds.
The calculator uses the formula:
Where:
Explanation: The calculator determines how much interest you'll save and how much faster you'll pay off your loan by maintaining funds in an offset account.
Details: Offset accounts can significantly reduce the total interest paid on your home loan, shorten the loan term, and provide flexibility as your money remains accessible while working to reduce your interest payments.
Tips: Enter your loan amount, interest rate, loan term, and the balance you expect to maintain in your offset account. The calculator will show your potential interest savings and reduced loan term.
Q1: How does an offset account differ from making extra repayments?
A: Unlike extra repayments which reduce your principal permanently, offset account funds remain accessible while still reducing the interest you pay.
Q2: Are there fees associated with offset accounts?
A: Some lenders charge fees for offset accounts, which should be considered when calculating potential savings.
Q3: Can I have multiple offset accounts?
A: Some lenders offer multiple offset accounts linked to a single loan, providing more flexibility in managing your finances.
Q4: Is interest calculated daily on the reduced balance?
A: Yes, most lenders calculate interest daily on the loan balance minus the offset account balance.
Q5: Are offset accounts available for all loan types?
A: Offset accounts are typically available for variable rate loans but may not be offered with fixed rate loans.