Case B is incorrect with the interest payments by 100K, making case A 70K cheaper than your case B. Also having 2 loans with different years of service 25y/30y is also not comparing apples with apples.Just because it saves you 5 yrs off the loan doesn't change your loan duration. Reducing the years of the loan increases the payment amount need for each payment.
Here are my figures on my mortgage calculator in Excel.
480,000 loan 30yrs 3.20% interest rate for the duration of the loan Paid fortnightly (26 payments a year) 100K in the offset from day one.
Results as follows.
Payments per fortnight = 957.67 Offset credit back into the loan of $122.74 each payment ((100,000*0.032)/365)*14 545 payments will be made totaling $521,930.83 to a balance under 100,000. You then use the 100,000 in the offset to pay it out. 208,918.61 interest will be paid 66,893.15 offset credited interest will be paid back to you (equivalent to 70 payments = 5yrs 5months) Total interest paid in the life of the loan is $142,025.46
In 20yrs 12months and 4 days (9yrs quicker than expected) your balance on the mortgage will be below 100,000 to which you can transfer from your offset to the mortgage account. From this month forward you'll be worse off if you left the 100,000 in the bank offset as they will only credit up to the amount of interest payable. only be paying principal. The next payment would be 957.67 paying 835.66 off the principle, 122.02 interest charged but be given 122.74 interest credit as the offset amount. But as they will only credit up to 122.02 you are now $0.72 worse off and even worse again with each passing fortnight.
480,000 loan 25yrs 3.20% interest rate for the duration of the loan Paid fortnightly (26 payments a year) 100K in the offset from day one.
Payments per fortnight = 1073.25 Offset credit back into the loan of $122.74 each payment ((100,000*0.032)/365)*14 466 payments will be made totaling $500,133.50 to a balance under 100,000. You then use the 100,000 in the offset to pay it out. 176,788.03 interest will be paid 57,196.71 credit interest will be paid back to you (53 payments = equivalent to 2yrs) Total interest over the life of the loan is $119,591.32
In 17yrs 11months and 10 days (7yrs 1month quicker than expected) your balance on the mortgage will be below 100,000 to which you can transfer from your offset to the mortgage account. From this month forward you'll be worse off if you left the 100,000 in the bank offset as they will only credit up to the amount of interest payable, only be paying principal. The next payment would be 1073.25 paying 950.86 off the principle, 122.38 interest charged but be given 122.74 interest credit as the offset amount. But as they will only credit up to 122.38 you are now $0.36 worse off and even worse again with each passing fortnight.
380,000 loan 30yrs 3.20% interest rate for the duration of the loan Paid fortnightly (26 payments a year) 0K in the offset from day one and never added too.
Results as follows.
Payments per fortnight = 758.16 Offset credit back into the loan of $0.00 each payment 780 payments will be made totaling $591,362 211,362.02 Interest will be paid 0.00 credit interest will be paid back to you Total interest paid over the life of the loan is $211,362.02
Which way is better? We can see which is better but I suppose it all comes down to how much can 1 physically pay each fortnight.