Your mortgage is fully offset. What happens next?
A mortgage is fully offset when the qualifying balance in its linked 100% offset equals or exceeds the outstanding loan balance. That can reduce the interest calculation to zero while the loan remains open. It does not itself cancel repayment obligations or discharge the mortgage. Your next step is to check how repayments are funded, what fees continue and what your lender requires if you want to close the loan.
By Ratey · General information for Australian borrowers.
Example: fully offset is a milestone, not a closure instruction
A household has $120,000 on its loan and $125,000 in a qualifying 100% offset. In the simplified model, $120,000 contributes to avoiding loan interest and $5,000 provides no additional mortgage-interest reduction.
Before moving that $5,000, the household lists a $4,000 bill due next week and checks the source of the next mortgage payment. The calculation shows where the interest benefit stops; the bill calendar explains how much cash is actually uncommitted. No investment choice follows automatically from reaching the milestone.
Keep the two balances visible
Write down the amount owed on the loan and the money held in the offset separately. A $180,000 loan beside $180,000 cash is different from a zero-balance loan beside zero cash. Both can have the same net position before costs, but the accounts and access arrangements are different.
For the simple 100% offset model, the interest-bearing balance is the larger of loan minus offset and zero. This arithmetic stops at zero. An additional dollar beyond the loan balance does not reduce mortgage interest further. CommBank’s account guide provides a lender-specific explanation of offset operation; your own product terms govern the account.
Check where the repayment comes from
Ask your lender to confirm the required repayment while fully offset. Keep the agreed payment arrangement in place unless the lender changes it. An interest outcome and a contractual payment obligation are separate questions.
Then map the cash movement. A repayment from the offset reduces cash and loan debt together. A repayment from another account reduces the loan while leaving offset cash intact. The latter can leave cash above the remaining debt. Fees and payment timing can disturb either simple picture, so keep a small operating margin if your plan depends on exact equality.
| Simplified movement | Loan after payment | Offset after payment |
|---|---|---|
| Start fully offset | $180,000 | $180,000 |
| Pay $2,000 from offset | $178,000 | $178,000 |
| Instead pay $2,000 from external cash | $178,000 | $180,000 |
Plan for a withdrawal before spending
Suppose you withdraw $30,000 for a purchase while the loan is still $180,000. The offset becomes $150,000, leaving $30,000 exposed to interest in the simplified model. At a hypothetical 6%, that exposure represents about $1,800 over a full year if all balances stay unchanged.
The useful question is how much cash will remain after the purchase and future bills. A fully offset position today may be temporary if some of the balance is earmarked for tax, renovations or family expenses. Label those commitments before treating the whole account as surplus.
Compare keeping the loan with closing it
Prepare two lists: the ongoing costs of leaving the arrangement open, and the steps and costs of paying out and discharging it. Include any package charge, account fee and payout quote. Ask what happens to the offset account and its direct debits when the linked loan closes.
If you want to retain access to money for a defined expense, put that amount and timing in the comparison. If you want to finish the loan, request the lender’s closure process instead of assuming an account transfer completes every step. Tax questions about a future investment property require advice about your circumstances; this cash-flow explanation does not resolve them.
Your next-step checklist
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Common questions
Can I stop making repayments when fully offset?
Do not assume so. Confirm the required payments with your lender and follow the agreed arrangement until it changes.
Does excess offset cash earn a negative loan rate?
No in the model shown here. The interest-bearing balance is floored at zero; check your account terms for any treatment of excess cash.
Does fully offset mean the property has no mortgage?
The loan and registered mortgage can remain in place. Paying out the debt and arranging discharge are separate steps to confirm with the lender.
Sources and assumptions
These primary sources support the explanations above. Examples use invented figures to show the calculation or decision; they are not available loan offers. Check your lender’s terms for your circumstances.
Calculations are estimates and do not establish borrowing eligibility. Read the calculation methodology.
Model the path to full offset
Compare a changing savings balance with your remaining mortgage.