Get the Right Home Loan in Perth: Expert Advice for Busy Families
Home Loan Offset Calculator
Defining the Term: What is a Home Loan Offset Calculator?
“This calculator helps you estimate how much interest and loan term you can save by utilising a Home Loan Offset Account.”
A Home Loan Offset Calculator helps you figure out how money you can save by keeping cash in a linked account instead of paying extra into your mortgage. You enter details like your loan balance, interest rate and expected account balance. The calculator then shows how interest you save over the life of the loan. This works because the lender only charges interest on what’s left of your loan after they take out the account balance. This can cut down the cost of borrowing a lot. These calculators don't just show interest savings. They also show how time you can save by using an offset strategy.
For example, they can show how months or years you can take off a standard 30-year term.
Many people like this because their money stays accessible for expenses or emergencies.
At the time it helps lower the amount they owe which means they pay less interest. This way they get a "return" on their cash to their mortgage interest rate. This rate is often higher than what they'd get from a savings account. There are also tax advantages. The savings are a reduction in expenses not earned income.
Using an offset calculator is a way to check if a loan is worth the fees. Many loans with offset features have a fee or a different interest rate. The calculator helps you find the "break-point”.
This is where the benefits of the account balance outweigh the costs. It is a tool for those who want to balance having easy access to their money with long-term debt reduction. It helps them make choices about their loan and savings.
Assumption:
It does not take into account any possible fees i.e. up-front fees or ongoing fees.
Interest rate does not change over the loan term.
Interest is calculated by compounding on the same repayment frequency selected, i.e. weekly, fortnightly, monthly. In practice, interest compounding frequency may not be the same as repayment frequency.
It is assumed that a year consists 26 fortnights or 52 weeks which is counted as 364 days rather than 365 or 366 days.
No rounding is done throughout calculation whereas repayments are rounded to at least the nearer cent in practice.
How to Use This Tool
To get an idea of how much you can save, just put in your loan details into these fields:
1. Loan Amount: Put in the total amount you owe on your mortgage (eg. $400,000). If you are looking to refinance, use the loan amount.
2. Interest Rate: Put in the interest rate you are paying now (eg. 5.50%). If you are comparing lenders, put in the rate they are offering.
3. Loan Term: Choose how many years you have left to pay on your mortgage, usually 25 or 30 years.
4. Repayment Frequency: Choose how often you make payments either by Monthly, Fortnightly & Weekly. Making payments often can save you even more interest.
5.Offset Account Balance: Put in the amount of cash you will keep in your offset account (eg. $50,000).
Understanding Your Results
Once you put in your details the calculator will give you a report that's just for you:
Monthly Repayment: This is what you normally pay every month. Even though your payment stays the same, using an offset account changes how your payment is used. That helps you.
Interest Saved: This is how money you will not have to pay the bank over the life of the loan. For people, in Perth this amount is really big.
Time Saved: You can see how many years and months you will cut off your mortgage.It is assumed that a year consists 26 fortnights or 52 weeks which is counted as 364 days rather than 365 or 366 days.
Revised Time: This shows you when you will be able to pay off your loan with the offset account, which we call your "Freedom Date".
