Offset Account vs Savings Account Comparison
Compare keeping spare cash in a mortgage offset account against a high interest savings account, accounting for tax on savings interest.
Your results
Calculation breakdown
- Offset benefit
- Offset benefit = amount × mortgage rate (tax-free interest saving)
- Savings after tax
- Savings after tax = amount × savings rate × (1 − marginal tax rate)
Worked example
With $20,000 spare cash, a 6.2% mortgage rate beats a 5% savings rate taxed at 32%: the offset saves $1,240 a year versus $680 after-tax from savings.
Assumptions
- Assumes the mortgage balance is at least equal to the amount being compared.
- Excludes account fees and any minimum balance requirements on either account type.
How this calculator works
Money in a mortgage offset account reduces the interest you pay on your home loan, effectively earning a tax-free return equal to your mortgage rate. This calculator compares that benefit against the after-tax interest from a high interest savings account, helping you decide where extra cash works hardest.
Frequently asked questions
Why is the offset benefit 'tax-free'?
Reducing loan interest isn't taxable income, unlike savings account interest, which is why offset accounts often come out ahead for the same rate.
When might savings still be better?
If you don't have a mortgage, or the savings rate is materially higher than your mortgage rate even after tax, a savings account can win.
Does this include any fees?
No, this compares interest outcomes only; check for offset account keeping fees or minimum balance requirements separately.
Results are estimates only and are not financial, tax, legal or credit advice.