Mortgage Offset Benefits

The following calculator is a simplified financial calculator of the cumulative benefit of a deposit balance held as an interest offset against a mortgage loan in Australia.

Interest offset allows the customer to earn effective interest at the marginal rate of the loan interest rate through being charged interest only on the net loan balance (outstanding loan amount less amount on offset).

As with all interest benefits, is calculated assuming the customer makes the same on-going principal payment against the loan and does not withdraw any funds from the offset. The benefit is the difference between the cumulative amount on offset versus the counter factual where the same amount was held in a standard interest bearing (taxable) deposit account.

Calculator

To derive an estimate of the offset benefit enter details about the loan and deposit scenario below:

The scheduled minimum payment for the remaining term of the loan is: per annum.

The expected recurring payments for the remaining term of the loan is:

Offset Fees

Offset accounts often incur higher account keeping fees. The following subtracts a monthly account keeping fee from the net benefit over the benefit term.

Assumptions

Any questions should be addressed to Christian Klettner.

This calculator is representative simplification of an offset benefit calculation as is not intended as a precise calculation for any given borrower.

It assumes:

• all payment and interest calculations are performed using annual interest rates and payment amounts, payment frequencies (fortnightly or monthly) and interest day count conventions such as (Actual/365) will vary this result;
• interest rates are constant through out the calculation period, in practice interest rates rise and fall. A precise interest rate forecast is difficult to obtain, but if calculations are assessing a historical sequence of interest on a particular loan product (and associated deposit alternative) these can be incorporated;
• deposit income is taxable at a single marginal tax rate, in practice some income may incur high marginal taxes than others;
• no interest is paid on offset balances greater than loan balances, in practice some interest may be paid or the borrower may chose to close the loan account.