Most households pay their home loan off slowly because their money leaves the account the day it arrives. An offset account, an investment property and a tax variation change when the money moves, not how much of it there is. Here is exactly what that is worth on a $700,000 home loan, with every number shown.
An offset account is charged interest daily on your loan balance minus whatever is sitting in the offset. So the question is not how much you earn. It is how many days each dollar sits in that account before it leaves.
Average balance held across the year
Every day this sits here, it is money the bank cannot charge you interest on
The part people miss. None of these four streams is new money. Your income is the same, the rent is the same, the tax bill for the year is identical. All that changes is how long each dollar sits in the offset before it goes back out. That is why this works for people who are not high income earners, and why it stops working the moment the discipline stops.
Worth being precise about two of them. The rent largely goes to the investment loan before it reaches the offset, so what it adds is time rather than extra cash. Depreciation is a paper deduction, and its value is already inside the tax refund above rather than being a separate stream on top. Counted once, the numbers hold up to any accountant.
A couple earning $120,000 and $60,000. They owe $700,000 on the home. They buy a $700,000 investment property renting at $650 a week, funded by releasing equity from the home for the deposit and costs. All figures use FY2026-27 resident tax rates and include the Medicare levy.
| Loan | Purpose | Amount | Rate | Deductible |
|---|---|---|---|---|
| Home loan | Owner occupied | $700,000 | 5.89% P&I | No |
| Equity split | Deposit plus purchase costs | $175,000 | 5.89% | Yes |
| Investment loan | 80% of the purchase price | $560,000 | 6.29% interest only | Yes |
The equity split is a separate account, never mixed with the home loan. Keeping deductible and non deductible borrowings apart is the single most important structural decision on this page.
| Item | Weekly | Fortnightly | Monthly | Annual |
|---|---|---|---|---|
| Rent received | $650 | $1,300 | $2,817 | $33,800 |
| Deductible interest | $876 | $1,751 | $3,794 | $45,532 |
| Rates, insurance, management, upkeep | $154 | $308 | $667 | $8,000 |
| Cash shortfall before tax | $380 | $759 | $1,644 | $19,732 |
| Depreciation claimed, no cash out | $250 | $500 | $1,083 | $13,000 |
| Taxable loss | $630 | $1,259 | $2,728 | $32,732 |
| Tax back at 32%, held by the $120,000 earner | $201 | $403 | $873 | $10,474 |
| Real cost of holding the property | $178 | $356 | $771 | $9,257 |
What $178 a week actually buys you. A $735,000 appreciating asset in your name, with a tenant and the tax system covering most of the cost of holding it. The property is not paying your home loan down by itself, and anyone who tells you otherwise is selling something. What it is doing is building the equity that funds your next move, for about the price of a weekly restaurant meal. The next section shows how to make that number smaller, or turn it positive.
One hundred and seventy eight dollars a week is what a 4.8 percent yield costs to hold. It is not what property costs. Change the type of property and the same household, the same home loan and the same rates produce a very different weekly number, in both directions.
| Property type | Gross yield | Costs you per week | Home loan gone in |
|---|---|---|---|
| House and land (the example above) | 4.8% | $178 out | 18 yrs 8 mths |
| Dual key | 6.5% | $51 out | 15 yrs 8 mths |
| Duplex | 6.7% | $47 out | 15 yrs 7 mths |
| Co-living | 8.5% | $54 in | 13 yrs 10 mths |
| Rooming house | 10% | $138 in | 12 yrs 8 mths |
Same couple on $120,000 and $60,000, same $700,000 home loan at 5.89%, same $700,000 purchase, same offset discipline. Only the property changes. A negative number is money out of your pocket each week; a positive number is money left in it.
That is a $316 a week spread across one product range. If the holding cost is what is stopping you, the answer is usually a different property rather than no property. A co-living or rooming house purchase pays you to own it and clears the home loan around six years sooner.
Which is why the first question on a call is what you can comfortably carry each week, not what you can borrow. The two are different numbers and only one of them keeps you sleeping.
And $178 is the top of the range, not the middle. This example borrows the deposit and the purchase costs as well as the property. Putting cash in brings the weekly number down before you change anything else.
Dual key and co-living are financed much like any other new build. Rooming houses earn the most but are the most specialised to fund and run, so we match the type to what suits you rather than to the biggest number on the page.
One detail worth noticing in the table: the timing structure is worth most on the lowest yielding property, because the tax refund it moves forward is largest when the loss is largest. As the property turns positive, the offset gains come from the rent instead.
Left alone, that $10,474 of tax arrives as a refund some time after 30 June. It might be fourteen months after the first dollar of the loss was incurred. For all of those months the money is with the ATO, doing nothing for you.
A PAYG withholding variation tells your employer to withhold less each pay, because your accountant has told the ATO you are running a rental loss. The total tax you pay across the year does not change by a cent. It simply arrives while you can still use it.
Your accountant lodges the form, and it has to be redone each financial year. If your circumstances change mid year and you end up under withheld, you will owe the difference at tax time, which is exactly why it is their job and not a form to guess at.
Extra in every fortnightly pay, instead of a lump sum after 30 June
Average extra balance this alone keeps in the offset across the year
Three paths on the same $700,000 loan, at the same 5.89%, for the same household. The only thing that changes is where the money sits between arriving and being spent.
This is the part that gets left off most versions of this page, and it is the part your accountant will ask about first. The eleven years break into two very different halves.
This household has about $10,433 a year left after living costs, repayments and the cost of holding the property. Sending it to the offset instead of letting it drift is what does most of the work. No structure can create this. It has to exist.
The card float, the rent parking, the salary sitting still and the tax variation. Worth $42,796 in interest without repaying one extra dollar. Smaller than the headline, and free.
Salary $5,894. Credit card float $8,000. Tax variation $5,237. Rent in transit $1,408. Each is a twelve month average, rounded to the nearest dollar, so the four add to $20,539 against an unrounded total of $20,540. At 5.89% that is roughly $1,210 of interest avoided every year, compounding.
How the two debts are treated, and why. Releasing $175,000 of equity means the home secures $875,000, but only $700,000 of it is the non deductible part. That is the debt the chart attacks, because it is the one the tax system gives you nothing for. The other $175,000 is deductible and is deliberately left alone.
The investment loan is interest only for the same reason: every spare dollar is better used against the home loan than against a debt you are already getting a deduction on. We stress test it at higher rates with you before anything is signed.
Once the first property has grown enough to release equity, most plans buy another one just like it. On these numbers that makes the home loan slower, not faster, and it is the single most common mistake in this strategy. It is a cash flow problem, not a location one: we buy brand new in growth corridors either way, so the second purchase is about what the property earns while you hold it.
There is a common idea that a second property speeds this up on its own, because its rent lands in the offset each month and sits there before the loan and expenses go out. That float is real. A second property adds around $8,500 to the average balance in your offset.
What it is worth is the part worth knowing. Money in an offset saves you the loan rate, so $8,500 sitting there avoids about $500 of interest a year. That is a genuine gain, and it is why the whole strategy works. It is also why the second purchase is chosen on its rent rather than left to chance: a property that covers itself keeps that money in the offset permanently instead of passing through it.
A second property accelerates the home loan the moment it pays for itself after tax. At current rates that happens at roughly 6.8 percent gross yield. Below it the property draws money out of your offset. Above it, the property starts filling the offset instead.
The weekly cost of each type is in what it costs you above. The same threshold applies to a second purchase as to a first: below roughly 6.8 percent it draws money out of your offset, above it the property starts filling it.
So the order matters more than the number of properties. Two low yielding properties give you twice the growth and no help at all with the home loan, because both of them draw on the offset instead of filling it. Pairing a growth purchase with a yield purchase gets you the equity and the weekly cash flow at the same time.
Yields shown are typical ranges for each product type rather than an offer on a specific property, and we model the actual one with you.
Timing depends on your own growth and equity position, which is one of the things we model on the call. At 5 percent growth the first property is usually ready to support the next move around year five.
Day to day spending goes on an interest free card. The card is paid in full from the offset on the due date, never before, never partially. Because roughly $6,000 of monthly expenses sits in the offset for an extra 30 to 55 days, it is worth about $8,000 of average balance, the single largest of the four streams.
It is also the one that can go badly wrong. Card interest sits around 20 percent. One month of carried balance costs more than the float earns in a year, and a habit of carrying a balance would undo the whole strategy several times over.
Only run this if all three are true.
The card is on direct debit for the full closing balance. The offset never drops below the card balance. Nobody in the household treats the limit as available money. If any one of those is shaky, drop this step and run the other three. You still get most of the benefit.
Nick walks through the same numbers on screen, including the two places this strategy most often gets set up incorrectly.
Two minutes thirty nine. Narrated walkthrough of the same figures shown above, including what the property actually costs to hold and where the saving really comes from.
This page is one couple, one income split, one set of rates. Change the split, the living costs, the rate or the property and the answer moves by years. Tell us where you are and we will model your position properly, with your real income, your real loan and current tax rates, and walk you through it.