Calculators · Owning and renewing

Offset mortgage

Models cash on deposit reducing the interest-bearing balance, account fees, and what that cash would otherwise earn.

Offset saves over 5 years

$22,178

Standard: $137,252 interest. Offset: $114,056 interest plus $1,017 in fees, with your cash reducing the balance that accrues interest.

Tax-free equivalent on your cash: 8.68%; Offsetting at 4.95% beats a savings rate taxed at 43%
Interest avoided per year: $7,920; On the average cash balance
Balance after the term: $530,122 vs $506,927; Standard vs offset

Cost over 5 years

Standard renewal$137,252
Offset mortgage$115,073

What drives the answer

Cash on deposit, start: $40,000
Net added each month: $4,000
Flexible portion rate: 4.95%
Fees over the term: $1,017

Discipline is the hidden input

Offset products reward people who keep large balances idle anyway and never treat the re-advanceable room as spending money. If the cash would otherwise be invested in a tax shelter at a higher return, the standard mortgage usually wins.

Assumptions behind these figures

The flexible portion is charged prime plus the spread on the balance net of cash on deposit; the fixed portion at its own rate. Payments equal the standard mortgage’s payment.
Cash grows by the monthly surplus and is never spent down. The invested alternative earns its return after tax at your marginal rate.
Prime is held constant for the term.

These calculators are educational illustrations, not advice and not an offer of credit. Figures are estimates from the inputs you enter and simplified rules; your lender's calculation, rates, fees, taxes and qualification will differ and are confirmed only by a licensed mortgage professional, lawyer or accountant. Mervin Truong is a licensed real estate professional, not a mortgage broker or financial advisor.

More for owning and renewing

Renewal savingsWhat a better renewal rate is worth over the term.

Mortgage penaltyThree months’ interest or the rate differential, and whether breaking pays.

Equity and refinanceLower rate, consolidate debts, take out equity: the real return.

From estimate to plan

Talk to Merv about the real numbers.

A calculator describes a scenario. I'll read it against what's selling now and introduce a licensed mortgage professional to confirm what you qualify for.

Offset mortgageOffset mortgage

Talk to Merv about the real numbers.

Offset mortgageOffset mortgage

Talk to Merv about the real numbers.

Offset mortgage

Offset mortgage