Should you keep extra money in your mortgage offset, or invest it?
Keeping money in your offset account gives you a guaranteed, risk-free return equal to your mortgage rate - say 5%. That’s solid, predictable, and reduces the interest you pay on your loan.
Investing, on the other hand, offers higher potential returns - historically around 9% per year in the Australian share market (roughly 5% capital growth and 4% dividends). But those returns aren’t guaranteed and there are tax implications.
Markets go up and down. And if you need to pull your money out at the wrong time - say, in the wake of something like Trump’s latest tariffs or another market downturn - you could lock in a loss rather than ride out the recovery.
So the right choice depends on more than just numbers.
- How long can you leave the money untouched?
- How comfortable are you with risk?
- And would having it in your offset help you avoid the temptation to spend?
We modelled a few scenarios in Canwi - Keeping extra money in an offset account on a 5% mortgage vs investing 10k in the ASX with a projected 9% (5% capital growth + 4% dividends) return.
Take a look:
You can see the impact over the next 5, 10 and 15 years on net wealth in the milestones at the top.
Plan A: (With a 10k investment in year 1): https://app.canwi.com.au/shared/yNVBuF1xkuamYQZkp-1WS
Plan B: (With all cash kept in the offset account) https://app.canwi.com.au/plan/3xf2ayuXgTiniyJSo-FXh
Plan C: (With a 10k investment in year 1 which is sold 10 years later)
https://app.canwi.com.au/plan/zdmPA04Qu6uxUd4Mf0Cqm