Mesh Finance
Calculator

Offset vs Redraw Calculator

Wondering if an offset account is actually worth it? Compare the cost of a loan with an offset account against a lower-rate loan with redraw, based on your loan balance and average offset amount.

$
Roughly how much you still owe.
$
Average savings balance you'd keep in the offset account.
$
Average everyday/transaction balance, stays out of redraw.
%
Rate on the offset/package loan (p.a.)
$
Package or offset fee per year.
%
Rate on the cheaper, no-offset loan (p.a.)
$
Often $0, but check the loan.
Your resultThe offset option may save you about $205 per yearThat's about $17 per month.
Estimated annual costTotal interest plus fees for one year, based on the figures you entered.
Loan with offset
$35,735Cheaper
Interest $35,340 · Fees $395
Loan with redraw only
$35,940
Interest $35,940 · Fees $0
Break-even savings balanceYou'd need to keep about $16,694 in savings (on top of your $10,000 everyday balance) for the offset loan to break even against the redraw loan.

How the calculator works

This calculator compares the estimated annual cost of each loan option so you can see which structure may suit your situation. Here is the step-by-step logic.

1. Offset option
Your effective loan balance is your full loan minus both your savings and everyday balances, since both sit in the offset account and reduce the balance interest is calculated on. We then add the annual fee.
2. Redraw option
Interest is calculated on the full loan balance at the cheaper redraw rate. Your savings and everyday balances don't reduce this balance, they're not offsetting anything, so redraw interest is based on the full amount owing. Any annual fee is added.
3. Compare and break even
We show the cheaper option, the monthly difference, and the exact offset balance you'd need to keep for the offset loan to break even against the redraw loan.

What the numbers mean

  • Estimated annual cost: The total interest plus fees for one year at the rates and balances you entered.
  • Monthly difference: The annual saving divided by 12 to make it easy to picture in your budget.
  • Break-even offset balance: The average offset balance you'd need so both options cost roughly the same. If this number is higher than your loan, the offset option may not reach break-even.

What is an offset account?

An offset account is a transaction account linked to your home loan. Money sitting in the offset account reduces the loan balance used to calculate interest. For example, if your loan is $600,000 and you have $30,000 in offset, you're generally only charged interest as if the loan balance was $570,000.

  • Can reduce the interest you pay
  • Can help pay the loan off faster if repayments stay the same
  • Money usually remains accessible day-to-day
  • Offset loans can have higher rates or annual package fees

What is redraw?

Redraw lets you access extra repayments you've made into your home loan, depending on the lender's rules. Instead of parking money in a separate offset account, you pay extra into the loan and may be able to redraw those funds later.

  • Can be useful when the loan has a lower rate
  • May suit people who don't need daily access to the money
  • Some lenders have redraw limits, delays or rules
  • Redraw isn't always the same as having cash in a bank account

Offset vs redraw, which one suits you?

Offset account
  • Better if you keep regular savings in your account
  • Good if you want easy, daily access to your money
  • Suits people who use multiple accounts or budgeting buckets
  • May come with higher rates or annual package fees
Redraw
  • Better if you want a cheaper interest rate
  • Good if you're disciplined with extra repayments
  • May suit people with lower everyday savings balances
  • Access to funds may depend on lender rules

Things to consider before choosing

The difference in interest rate
Even 0.10% can add up over 25–30 years.
Annual and package fees
Factor these in, they eat into offset savings.
How much you keep in offset
Be realistic about your average balance, not the peak.
Everyday access to funds
Do you need to move money in and out often?
Future investment use
If the property may become an investment, offset can protect tax deductibility.
Lender redraw rules
Some lenders limit redraw amounts, timing or frequency.
This calculator provides a general estimate only and does not take into account daily interest calculations, changing balances, repayments, lender policy, tax treatment, future use of the property or your personal circumstances. Please speak with Mesh Finance before making a decision.
This is a simplified, annualised estimate only, it doesn't model daily interest, amortisation or lender policy.