Standard P&I
—
fixed monthly repayment
Year 1 — goes to interest—
Year 1 — reduces principal—
Total interest (30 yr)—
Total repaid—
In year one, — of every repayment goes to the bank — not to reducing your debt.
I/O + Offset Strategy
—
I/O interest + monthly saving
Starting liquidity—
Offset at year 5—
Total interest paid—
Loan effectively paid off—
—
Year 1 Reality Check
What actually happens in the first 12 months under each approach
P&I — Year 1
—
interest
Interest paid
—
Principal repaid
—
Most of what feels like "paying off your mortgage" in year 1 is actually interest to the bank — your actual debt reduces very slowly.
I/O Strategy — Year 1
—
offset growth
Interest paid (net)
—
Offset balance growth
—
Principal reduced (lump)
—
You pay interest only on the net balance (loan minus offset). Your savings stay accessible — and they're reducing your interest cost every month.
Net Debt Position Over Time
P&I loan balance vs I/O strategy net position (loan minus accessible offset savings)
P&I Balance
I/O Loan Balance
Offset (accessible savings)
Net Position
Cumulative Interest Paid
How total interest accumulates over time under each approach
P&I
I/O Strategy
Year-by-Year Comparison