u/JTHelpsWithFinance

TL;DR: Building usually isn’t one giant loan that magically appears on Day 1. You’re generally buying land first, then progressively drawing down the construction loan over time as the house gets built. The repayments usually start smaller, then slowly increase during the build. Most of the stress comes from timing, cashflow and all the little costs people don’t think about upfront.

I've seen a surge in interest in 'new' because of the proposed tax changes, a lot of which is about house and land. So, this is for the first home buyers (and honestly plenty of upgraders or investors too) that haven't done construction finance before.

The biggest thing to understand is that you’re usually doing TWO separate things. You're buying land, then building a house afterwards under a separate construction contract. Even if the builder markets it nicely as a “house and land package”.

So let’s use rough numbers:

• Land = $360k
• Build contract = $400k
• Total package = $760k
• Loan amount = $684k (90% LVR).
• First assumption = no LMI.
  • Yes. I know there would be LMI normally for a 90% loan... but I'm just trying to make the maths easy for the sake of education.
• Second assumption = buying in QLD.

Here’s the bit people don’t realise: the bank does NOT show up to land settlement with the full $684k. The lender usually holds the build funds back for later construction stages.

So at land settlement, maybe only ~$284k of the bank’s money is actually being used toward the land purchase itself, while the future construction funds remain undrawn in the background waiting for the build to happen. This means...

You need to be prepared to pay your ENTIRE shortfall at land settlement. In this case, that's something like $92k if you're buying in QLD and you're NOT a first home buyer.

Example summary of the costs involved to purchase and settle.

With construction:-

1. You settle the land first (some people pay the build deposit up front with cash, but make sure this doesn't screw with your shortfall at land settlement)
2. Build deposit of 5%
3. Slab of 10%
4. Frame of 15%
5. Lockup of 35%
6. Fixing of 25%
7. Practical Complation of 10%

Here's how the process works:-

1. Builder sends invoice.
2. You sign off.
3. Bank releases that stage payment.
   1. Some payments require an inspection - depends on the bank and the state you're building in.
4. That cycle just repeats itself for months. Usually 3-6 months in most of Australia, aside from WA which in my experience takes closer to 9-12 months.

And this is why repayments during construction usually start smaller and gradually increase as more of the loan gets drawn down. It's usually interest-only, to ease the cashflow burden... then becomes principal & interest at a certain point - usually a timeframe after land settlement or after you move into the home.

Example of how loan repayments become larger, over time, as the build progresses.

By practical completion, the loan is mostly or fully drawn and the repayments start looking much more like a “normal” mortgage.

I think this is where some people accidentally get themselves into trouble.

Because they qualify comfortably at the START of the process, but don’t mentally prepare for what things look like 8-12 months later when:

• repayments grow as more of the loan is drawn on
• rates may have changed (increase), if you're on variable
• rent is still being paid on your current property
• site costs blew out
• variations got added
• construction got delayed

And unfortunately… delays aren’t exactly rare these days.

Another thing people don’t always realise is that building can sometimes reduce upfront stamp duty compared to buying established, because in many states the duty is mostly being assessed on the LAND purchase first, not the future unbuilt house.

Specific bit for first home buyers - because you can get benefits

Depending on state policies and price caps, there can sometimes also be:

1. stamp duty concessions (complete waivers, if not significant discounts)
2. grants (e.g. $30k in QLD if buying under $750k, $15k in SA)
3. other incentives for building new homes (e.g. if in future you're thinking it might become an investment, you're might be considering the future negative gearing eligibility)

If you combine a lot of benefits (e.g. discounted, or no, stamp duty + a construction grant) you might be in a position to save a significant amount compared to established.

Examples of cost differences in QLD if purchasing a $760k property as established, new home, or first new home.

But personally, I always think people should treat grants as “nice money later”, not “money we absolutely need at settlement so we can do this thing". Because timing matters, and grants don’t always arrive when people expect them to. They can be applied at land settlement, sure, but they can also land at slab, or way later in construction.

One thing I'd recommend considering, if you have the borrowing power, is a proper turnkey contracts. Because people MASSIVELY underestimate how much stuff still exists outside the basic build contract. Things like:

• fencing
• landscaping
• driveway
• blinds
• aircon
• retaining walls

People get to completion thinking “Awesome, the house is done" and then suddenly realise they still need another $60k+ just to make the place fully functional and liveable. That took long enough to prepare to buy the house - how long is it now going to take to save for it?

A proper turnkey build can reduce a lot of that stress because more of those items are included upfront inside the original contract and loan structure from Day 1. Yes, the total contract price can look a bit higher initially and you may not want to pay interest on it - but sometimes that’s actually safer from a cashflow perspective than scrambling for extra money later after your savings buffer already got chewed up during construction.

One other thing worth mentioning quickly: valuations can occasionally become messy with builds too. Construction costs move around (usually up) and valuers sometimes see things differently and don't think the market's changed that much. Also, the builder might hit you with a price increase if it's been a long time (>3 months) since they gave you a quote.

So buffers matter more with builds than people realise, especially if you're buying off the plan and you're waiting many months before land registration is expected to occur.

TL;DR: Building usually isn’t one giant loan that magically appears on Day 1. You’re generally buying land first, then progressively drawing down the construction loan over time as the house gets built. The repayments usually start smaller, then slowly increase during the build. Most of the stress comes from timing, cashflow and all the little costs people don’t think about upfront.

I've seen a surge in interest in 'new' because of the proposed tax changes, a lot of which is about house and land. So, this is for the first home buyers (and honestly plenty of upgraders or investors too) that haven't done construction finance before.

The biggest thing to understand is that you’re usually doing TWO separate things. You're buying land, then building a house afterwards under a separate construction contract. Even if the builder markets it nicely as a “house and land package”.

So let’s use rough numbers:

• Land = $360k
• Build contract = $400k
• Total package = $760k
• Loan amount = $684k (90% LVR).
• First assumption = no LMI.
  • Yes. I know there would be LMI normally for a 90% loan... but I'm just trying to make the maths easy for the sake of education.
• Second assumption = buying in QLD.

Here’s the bit people don’t realise: the bank does NOT show up to land settlement with the full $684k. The lender usually holds the build funds back for later construction stages.

So at land settlement, maybe only ~$284k of the bank’s money is actually being used toward the land purchase itself, while the future construction funds remain undrawn in the background waiting for the build to happen. This means...

You need to be prepared to pay your ENTIRE shortfall at land settlement. In this case, that's something like $92k if you're buying in QLD and you're NOT a first home buyer.

Example summary of the costs involved to purchase and settle.

With construction:-

1. You settle the land first (some people pay the build deposit up front with cash, but make sure this doesn't screw with your shortfall at land settlement)
2. Build deposit of 5%
3. Slab of 10%
4. Frame of 15%
5. Lockup of 35%
6. Fixing of 25%
7. Practical Complation of 10%

Here's how the process works:-

1. Builder sends invoice.
2. You sign off.
3. Bank releases that stage payment.
   1. Some payments require an inspection - depends on the bank and the state you're building in.
4. That cycle just repeats itself for months. Usually 4-6 months in most of Australia, aside from WA which in my experience takes closer to 9-12 months.

And this is why repayments during construction usually start smaller and gradually increase as more of the loan gets drawn down. It's usually interest-only, to ease the cashflow burden... then becomes principal & interest at a certain point - usually a timeframe after land settlement or after you move into the home.

Example of how loan repayments become larger, over time, as the build progresses.

By practical completion, the loan is mostly or fully drawn and the repayments start looking much more like a “normal” mortgage.

I think this is where some people accidentally get themselves into trouble.

Because they qualify comfortably at the START of the process, but don’t mentally prepare for what things look like 8-12 months later when:

• repayments grow as more of the loan is drawn on
• rates may have changed (increase), if you're on variable
• rent is still being paid on your current property
• site costs blew out
• variations got added
• construction got delayed

And unfortunately… delays aren’t exactly rare these days.

Another thing people don’t always realise is that building can sometimes reduce upfront stamp duty compared to buying established, because in many states the duty is mostly being assessed on the LAND purchase first, not the future unbuilt house.

Specific bit for first home buyers - because you can get benefits

Depending on state policies and price caps, there can sometimes also be:

1. stamp duty concessions (complete waivers, if not significant discounts)
2. grants (e.g. $30k in QLD if buying under $750k, $15k in SA)
3. other incentives for building new homes (e.g. if in future you're thinking it might become an investment, you're might be considering the future negative gearing eligibility)

If you combine a lot of benefits (e.g. discounted, or no, stamp duty + a construction grant) you might be in a position to save a significant amount compared to established.

Examples of cost differences in QLD if purchasing a $760k property as established, new home, or first new home.

But personally, I always think people should treat grants as “nice money later”, not “money we absolutely need at settlement so we can do this thing". Because timing matters, and grants don’t always arrive when people expect them to. They can be applied at land settlement, sure, but they can also land at slab, or way later in construction.

One thing I'd recommend considering, if you have the borrowing power, is a proper turnkey contracts. Because people MASSIVELY underestimate how much stuff still exists outside the basic build contract. Things like:

• fencing
• landscaping
• driveway
• blinds
• aircon
• retaining walls

People get to completion thinking “Awesome, the house is done" and then suddenly realise they still need another $60k+ just to make the place fully functional and liveable. That took long enough to prepare to buy the house - how long is it now going to take to save for it?

A proper turnkey build can reduce a lot of that stress because more of those items are included upfront inside the original contract and loan structure from Day 1. Yes, the total contract price can look a bit higher initially and you may not want to pay interest on it - but sometimes that’s actually safer from a cashflow perspective than scrambling for extra money later after your savings buffer already got chewed up during construction.

One other thing worth mentioning quickly: valuations can occasionally become messy with builds too. Construction costs move around (usually up) and valuers sometimes see things differently and don't think the market's changed that much. Also, the builder might hit you with a price increase if it's been a long time (>3 months) since they gave you a quote.

So buffers matter more with builds than people realise, especially if you're buying off the plan and you're waiting many months before land registration is expected to occur.

TLDR: There’s no magic trick. Most “pay your mortgage off fast” strategies are just a combination of paying more (extra repayments), reducing interest (via offset or redraw), using equity intelligently (debt-recycling to buy an investment property) and staying disciplined for a long time. That’s basically it.

We've all seen online the companies that charge a fee to attend a course or seminar that so you can “beat the bank” or “pay off your mortgage in 7-10 years”.

In my opinion... most of the core concepts are pretty simple and should be freely available - so, here they are. If you're considering making a big change and want expert guidance and support, then maybe talk to a professional if you want help navigating it.

First I'll give a graph and summary that explains the benefit-over-time of four different combinations, so you can see what they each look like. Then I'll explain each of the methods in a bit more detail.

https://preview.redd.it/6rfwky14671h1.png?width=2666&format=png&auto=webp&s=d7119cc9451f287a097a448fa91f19381b262e25

1. Switch from monthly to fortnightly repayments (deliberately scheduled extra repayments)

If your repayment is $3,000/month, then “true fortnightly” repayments would be $1,500 every 2 weeks. Because there are 26 fortnights in a year, you effectively make 26 x $1,500 = $39,000 in repayments. When compared to the monthly, which is 12 x $3,000 = $36,000 in repayments - it's like you're paying for 13 months instead of 12.

That extra repayment each year attacks the principal earlier, which reduces future interest calculations. On a normal 30-year mortgage, this alone can shave roughly 4 to 6 years off the loan and save a massive amount of interest.

Not because the bank changed your rate, but because you paid extra earlier.

2. Build redraw or offset aggressively (making repayments more effective)

I did a post recently (here) that explains how every dollar sitting in offset (or paid early into redraw) makes each repayment you make allocate more of your dollars to paying down the principal loan amount, rather than the interest. This starts compounding on itself over time and effectively snowballs.

Some people (like me) build up the offset, or redraw, by dumping in savings from tax returns, deliberately directing salary into the offset account, paying bonuses into redraw or offset, and in general just trying to keep minimal cash outside the loan.

The more consistently you do this, the faster things move. If you’re disciplined enough, this can take another 5 - 10 years off the loan, depending on how aggressive you are.

3. If you struggle to save, force the discipline (refinance deliberately to a shorter loan term)

Not everyone is naturally good with offset, redraw or general savings behaviours. Some people see $40k sitting there and slowly spend it - holidays, toys, home upgrades, cars... we've all done it. No judgement here.

But if you are worried about your discipline and discretionary spending, one option is to refinance to a much shorter loan term. The traditional timeframe for a loan is around 30 years, but you could refinance to maybe 20, 15, or even 10 years.

This massively increases the minimum repayment and kind of forces you to smash down principal whether you feel motivated or not.

WARNING: This is not suitable for everyone, as many people may need a savings buffer in their lives to be ready to handle emergencies and if they're on lower incomes it might be tough - but for high-income earners who are prone to discretional or impulse spending it can work very well.

4. The “investment property accelerator” strategy

A lot of those companies who 'sell the cource' also recommend or are involved in the purchase of an investment property. Sometimes they get a benefit (i.e. commission or referral payment) from this, sometimes they don't - you should probably ask that question when you speak to them.

The strategy can work very well in the right circumstances, but here's a simplified version:

1. Buy investment property
2. Wait for growth
3. Sell in 7-10 years time after a 'doubling' cycle
4. Use proceeds to wipe down PPOR debt

But you need to consider the holding costs over that 7-10 years and whether or not it'll get in the way of the first two ideas mentioned above. This is not a “2-year hack”, it's a long-term committment (like any investment strategy should be) and it it really only works if you bought well, held long enough, and your cashflow survives the ride.

5. Some people go even harder (and sell off assets)

Some companies like to recommend that people sell unnecessary cars, liquidate non-income producing assets (or toys that absorb a lot of cash - like boats), strip spending right back with disciplined budgets, and then throw every spare dollar (including sale proceed) into the mortgage.

And yes - mathematically, smashing principal early works incredibly well. Obviously.

But personally, I think there’s a balance and an element of not wanting to sacrifice your whole lifestyle... unless you really, really want to. A lot of my clients say they still want, or need, things like emergency savings, quality of life (especially with kids), flexibility, breathing room, etc.

IN SUMMARY, my views on this are...

The basics of it aren't too difficult (I hope, after this explanation), but you just need to combine them all together in the way that suits you best. Being mortgage-free at 40 sounds great, but being completely burnt out in the process of getting there maybe isn’t. Make sure that when you're planning this out with your partner (if you have one) that everyone's on board and they agree that the benefits are worth the changes/sacrifices.

Adding an investment property into the mix can help you go from ~19 years to <10 years, but you need careful planning, a solid expert, and reflection on how the property might impact your other strategies - because if it absorbs the cash you're putting towards fortnightly + offset/redraw, then you're becoming increasingly reliant on the investment paying off.

>Disclaimer: This post is being written on 15 May 2026, only 3 days after proposed government announcements around negative gearing, CGT changes, and incentives around investment property and favouring new builds. As I write this, these are proposals/discussions and not final law. Treasury, Parliament, the Senate, etc. still need to determine what is actually going to happens. So if you’re considering the investment property as part of a debt-reduction strategy, keep an eye on policy changes carefully so you know how to measure your 'exit point' based on costs.

TLDR: There’s no magic trick. Most “pay your mortgage off fast” strategies are just a combination of paying more (extra repayments), reducing interest (via offset or redraw), using equity intelligently (debt-recycling to buy an investment property) and staying disciplined for a long time. That’s basically it.

We've all seen online the companies that charge a fee to attend a course or seminar that so you can “beat the bank” or “pay off your mortgage in 7-10 years”.

In my opinion... most of the core concepts are pretty simple and should be freely available - so, here they are. If you're considering making a big change and want expert guidance and support, then maybe talk to a professional if you want help navigating it.

First I'll give a graph and summary that explains the benefit-over-time of four different combinations, so you can see what they each look like. Then I'll explain each of the methods in a bit more detail.

https://preview.redd.it/4jcw4xl6871h1.png?width=2666&format=png&auto=webp&s=bb82c003c017cdb6660a9ada731d6849a0985ca8

1. Switch from monthly to fortnightly repayments (deliberately scheduled extra repayments)

If your repayment is $3,000/month, then “true fortnightly” repayments would be $1,500 every 2 weeks. Because there are 26 fortnights in a year, you effectively make 26 x $1,500 = $39,000 in repayments. When compared to the monthly, which is 12 x $3,000 = $36,000 in repayments - it's like you're paying for 13 months instead of 12.

That extra repayment each year attacks the principal earlier, which reduces future interest calculations. On a normal 30-year mortgage, this alone can shave roughly 4 to 6 years off the loan and save a massive amount of interest.

Not because the bank changed your rate, but because you paid extra earlier.

2. Build redraw or offset aggressively (making repayments more effective)

I did a post recently (here) that explains how every dollar sitting in offset (or paid early into redraw) makes each repayment you make allocate more of your dollars to paying down the principal loan amount, rather than the interest. This starts compounding on itself over time and effectively snowballs.

Some people (like me) build up the offset, or redraw, by dumping in savings from tax returns, deliberately directing salary into the offset account, paying bonuses into redraw or offset, and in general just trying to keep minimal cash outside the loan.

The more consistently you do this, the faster things move. If you’re disciplined enough, this can take another 5 - 10 years off the loan, depending on how aggressive you are.

3. If you struggle to save, force the discipline (refinance deliberately to a shorter loan term)

Not everyone is naturally good with offset, redraw or general savings behaviours. Some people see $40k sitting there and slowly spend it - holidays, toys, home upgrades, cars... we've all done it. No judgement here.

But if you are worried about your discipline and discretionary spending, one option is to refinance to a much shorter loan term. The traditional timeframe for a loan is around 30 years, but you could refinance to maybe 20, 15, or even 10 years.

This massively increases the minimum repayment and kind of forces you to smash down principal whether you feel motivated or not.

WARNING: This is not suitable for everyone, as many people may need a savings buffer in their lives to be ready to handle emergencies and if they're on lower incomes it might be tough - but for high-income earners who are prone to discretional or impulse spending it can work very well.

4. The “investment property accelerator” strategy

A lot of those companies who 'sell the cource' also recommend or are involved in the purchase of an investment property. Sometimes they get a benefit (i.e. commission or referral payment) from this, sometimes they don't - you should probably ask that question when you speak to them.

The strategy can work very well in the right circumstances, but here's a simplified version:

1. Buy investment property
2. Wait for growth
3. Sell in 7-10 years time after a 'doubling' cycle
4. Use proceeds to wipe down PPOR debt

But you need to consider the holding costs over that 7-10 years and whether or not it'll get in the way of the first two ideas mentioned above. This is not a “2-year hack”, it's a long-term committment (like any investment strategy should be) and it it really only works if you bought well, held long enough, and your cashflow survives the ride.

5. Some people go even harder (and sell off assets)

Some companies like to recommend that people sell unnecessary cars, liquidate non-income producing assets (or toys that absorb a lot of cash - like boats), strip spending right back with disciplined budgets, and then throw every spare dollar (including sale proceed) into the mortgage.

And yes - mathematically, smashing principal early works incredibly well. Obviously.

But personally, I think there’s a balance and an element of not wanting to sacrifice your whole lifestyle... unless you really, really want to. A lot of my clients say they still want, or need, things like emergency savings, quality of life (especially with kids), flexibility, breathing room, etc.

IN SUMMARY, my views on this are...

The basics of it aren't too difficult (I hope, after this explanation), but you just need to combine them all together in the way that suits you best. Being mortgage-free at 40 sounds great, but being completely burnt out in the process of getting there maybe isn’t. Make sure that when you're planning this out with your partner (if you have one) that everyone's on board and they agree that the benefits are worth the changes/sacrifices.

Adding an investment property into the mix can help you go from ~19 years to <10 years, but you need careful planning, a solid expert, and reflection on how the property might impact your other strategies - because if it absorbs the cash you're putting towards fortnightly + offset/redraw, then you're becoming increasingly reliant on the investment paying off.

>Disclaimer: This post is being written on 15 May 2026, only 3 days after proposed government announcements around negative gearing, CGT changes, and incentives around investment property and favouring new builds. As I write this, these are proposals/discussions and not final law. Treasury, Parliament, the Senate, etc. still need to determine what is actually going to happens. So if you’re considering the investment property as part of a debt-reduction strategy, keep an eye on policy changes carefully so you know how to measure your 'exit point' based on costs.

TL;DR: Offset doesn’t lower your monthly repayments. It reduces the interest charged, which means more of your repayment goes toward the principal. That’s how it saves you money - paying more principal, over time, reduces your loan term, and thus saves you interest.

This isn't just common amongst first home buyers, I also see it amongst more experienced homeowners.

The simple idea it to think of your loan like this... if your loan is $500,000 and you have $50,000 in your offset account, then the bank doesn’t charge interest on $500k - they charge it on $500,000 - $50,000 = $450,000.

Example Scenario

Let’s say your $500k loan is at 5.85% for 30 years, so the monthly repayment is around $2,948.

• Without offset: Interest = $2,417, Principal = $522
• With $50k in offset: Interest = $2,194, Principal = $754

If you're a visual learner - have a look at the below. Yes, I did use ChatGPT for generating this image... but I think it works well enough to explain it.

https://preview.redd.it/qssukwx2tfzg1.png?width=1536&format=png&auto=webp&s=942f53ffd7d8fb8dac936e03a5e0d92616fa181c

As you can see - it's the same repayment… but you’re paying off the loan faster. That extra $232 towards your principal counts as an "extra repayment" and usually goes into redraw. As the redraw grows in size (with consistent extras due to offset benefit) it 'snowballs' and continues to make more of your repayment go towards the principal, not the interest.

So, to be clear - you haven’t changed the repayment, but you have increased how much it actually pays down your loan.

Over a full 30-year term, this $50k in offset (if it stays there) would mean the loan would reach a balance of zero after 24 years and 9 months. This reduction of 5 years and 3 months would mean an interest saving of around $186,871.

With Offset (Package) vs Without Offset (Basic)

Often, lenders will offer a basic loan at a lower rate, something like

• Loan A: 5.85% with offset
• Loan B: 5.75% without offset

So you’re paying 0.10% extra for the offset, but how much money do you need in offset for it to be worth it?

In the above example, Loan A has 5.75% without offset - which means it would have repayments of $2,918/month. $2,396 of this would be interest and $522 of this would be principal. If you chose to give up cash (savings) and pay extra into redraw manually, then you would be getting the benefits.

If you had Loan B instead with 5.85% as your interest rate and $50k in offset - it would mean repayments of $2,948/month. This is $30/month higher. But, the effective interest (due to offset benefits) becomes $2,194 and the effective principal becomes $754. This means you're paying $202 less in interest and $232 more against your principal.

At about $8k of savings in offset, for a $500k loan, you're breaking even on the 0.10% higher rate. If you have more than $8k saved, you're doing better and paying off your loan faster than what the additional offset is costing you.

In simpler terms, offset works best if you:

• Get your income paid into it
• Keep savings sitting there
• Don’t constantly drain it

But if you spend everything each month and keep the balance near zero (or below $8k, in this example) then you’re paying for a feature you’re not using.

TL;DR: Offset doesn’t lower your monthly repayments. It reduces the interest charged, which means more of your repayment goes toward the principal. That’s how it saves you money - paying more principal, over time, reduces your loan term, and thus saves you interest.

This isn't just common amongst first home buyers, I also see it amongst more experienced homeowners.

The simple idea it to think of your loan like this... if your loan is $500,000 and you have $50,000 in your offset account, then the bank doesn’t charge interest on $500k - they charge it on $500,000 - $50,000 = $450,000.

Example Scenario

Let’s say your $500k loan is at 5.85% for 30 years, so the monthly repayment is around $2,948.

• Without offset: Interest = $2,417, Principal = $522
• With $50k in offset: Interest = $2,194, Principal = $754

If you're a visual learner - have a look at the below. Yes, I did use ChatGPT for generating this image... but I think it works well enough to explain it.

https://preview.redd.it/nqa7ymeesfzg1.png?width=1536&format=png&auto=webp&s=e9b1a859cc300b8443f831ee98ed01c8e6755b2c

As you can see - it's the same repayment… but you’re paying off the loan faster. That extra $232 towards your principal counts as an "extra repayment" and usually goes into redraw. As the redraw grows in size (with consistent extras due to offset benefit) it 'snowballs' and continues to make more of your repayment go towards the principal, not the interest.

So, to be clear - you haven’t changed the repayment, but you have increased how much it actually pays down your loan.

Over a full 30-year term, this $50k in offset (if it stays there) would mean the loan would reach a balance of zero after 24 years and 9 months. This reduction of 5 years and 3 months would mean an interest saving of around $186,871.

With Offset (Package) vs Without Offset (Basic)

Often, lenders will offer a basic loan at a lower rate, something like

• Loan A: 5.85% with offset
• Loan B: 5.75% without offset

So you’re paying 0.10% extra for the offset, but how much money do you need in offset for it to be worth it?

In the above example, Loan A has 5.75% without offset - which means it would have repayments of $2,918/month. $2,396 of this would be interest and $522 of this would be principal. If you chose to give up cash (savings) and pay extra into redraw manually, then you would be getting the benefits.

If you had Loan B instead with 5.85% as your interest rate and $50k in offset - it would mean repayments of $2,948/month. This is $30/month higher. But, the effective interest (due to offset benefits) becomes $2,194 and the effective principal becomes $754. This means you're paying $202 less in interest and $232 more against your principal.

At about $8k of savings in offset, for a $500k loan, you're breaking even on the 0.10% higher rate. If you have more than $8k saved, you're doing better and paying off your loan faster than what the additional offset is costing you.

In simpler terms, offset works best if you:

• Get your income paid into it
• Keep savings sitting there
• Don’t constantly drain it

But if you spend everything each month and keep the balance near zero (or below $8k, in this example) then you’re paying for a feature you’re not using.