A loan and mortgage calculator works out your repayment from the amount borrowed, the interest rate and the term - and, here, what an offset account or extra repayments change. The basic monthly payment is only part of the picture. Interest-only periods, extra repayments, and offset accounts each change what you actually pay - this models all three, not just the sticker-price formula.
This runs a real month-by-month simulation rather than a single formula, since extra repayments, offset balances, and interest-only periods each change the loan balance in a way one equation cannot capture cleanly. Each month: interest is charged on the outstanding balance minus any offset amount, the minimum payment (interest-only, or principal-and-interest once that phase starts) is applied, and any extra amount goes straight to reducing the balance. The principal-and-interest payment itself is calculated once, using the standard amortization formula, based on whatever balance and time remain at the point that phase begins - which is also exactly why the payment steps up if an interest-only period was used. Most free loan calculators use a single formula and cannot model offset accounts, extra repayments, or an interest-only period at all - certainly not all three together, changing at different points in the loan.
Each month: interest = (loan balance − offset balance) × monthly rate. Your regular payment stays exactly the same dollar amount every month - what changes is how much of it is interest versus principal. Take a $500,000 balance at 6% with $20,000 sitting in offset: without the offset, that month’s interest is $500,000 × 0.5% = $2,500. With the $20,000 offset, it is ($500,000 − $20,000) × 0.5% = $2,400 - a genuine $100 saved that month, silently redirected from interest into paying down the balance faster, since your payment did not change. This repeats every month on whatever the offset and loan balances happen to be at the time, which is why a real simulation is needed rather than one formula for the whole loan.
Extra repayments work differently: the extra amount is subtracted directly from the loan balance the moment it is paid, on top of the regular payment. There is no separate "extra repayment interest formula" - the effect shows up the following month, because next month’s interest is charged on a smaller balance than it otherwise would have been. $500 extra this month means next month’s balance - and therefore next month’s interest - is calculated on $500 less than the no-extras schedule, permanently, for the rest of the loan. This is also why extra repayments and offset save identical total interest for the same dollar amount: both ultimately mean less balance is earning interest against you, just reached by two different mechanical routes - one reduces the balance directly, the other reduces what the balance is charged on.
This page projects the loan forward. Checking a statement you have already received is a different job, and it has its own page: enter the balance, the average offset and the interest the statement shows, and it reconciles the three.
Is my offset account actually working? - the reconciliation, plus what to do when the gap is too large to be daily-balance noise. ASIC found lenders repaid $55 million to customers whose offset accounts were never linked to the loan at all.
Your repayment depends on the amount borrowed, the interest rate and the loan term. On a $500,000 loan at 6% over 30 years, the principal-and-interest repayment is about $2,998 a month. Shortening the term raises the monthly figure but cuts the total interest sharply.
Yes, and by more than most people expect, because every extra dollar comes off the balance that interest is charged on for the rest of the loan. On a $500,000 loan at 6%, an extra $500 a month saves roughly $199,500 in interest and clears the loan about 9 years early.
During an interest-only period you pay only the interest, so the balance does not fall. Repayments are lower for that time, but they step up afterwards because the original balance now has fewer years left to be repaid over.
Principal is the amount actually borrowed; interest is the cost of borrowing it, charged as a percentage of whatever principal is still outstanding. Every repayment on a standard loan covers some of each - early on mostly interest, later on mostly principal, as the balance falls.
The interest rate is what is charged on the loan balance itself. APR (or the comparison rate in some countries) folds in the interest rate plus most upfront and ongoing fees into a single annual percentage, giving a fairer way to compare two loans that charge different fees alongside different headline rates.
Both save the same interest for the same amount of money, because interest calculations treat them almost identically. The real difference is access: money in an offset account stays available to withdraw, while extra repayments are generally locked into the loan unless the loan has a redraw facility.
A fixed rate stays the same for a set period regardless of what market rates do, giving predictable repayments but no benefit if rates fall. A variable rate moves with the market, so repayments can rise or fall - this calculator assumes a constant rate throughout, so a variable-rate loan should be modeled with your best current estimate.