Skip to main content
Loading the latest on mortgages, RBA & inflation…
TL
Tailored LoansSydney

Article

Sizing Your Cash and Offset Buffer When You’re Geared

A practical, numbers‑based guide to how much cash and offset buffer you should hold when you’re negatively or highly geared into property in Australia.

20 Sept 2026Updated 20 Sept 20265 min read

Key Takeaway

Australian borrowers who are geared into property should typically hold 6–12 months of stressed living costs plus all loan repayments in cash or a true offset account, above the APRA 3% serviceability buffer. For highly geared or self‑employed investors, closer to 12–18 months is prudent. The article explains how to calculate a personal buffer, prioritise offset over redraw, and adjust your target by LVR, rent reliance and job stability, so readers can size and start building their buffer this week.

Sizing Your Cash and Offset Buffer When You’re Geared

When you’re geared into property, a practical personal buffer is usually 6–12 months of stressed living costs plus all home and investment loan repayments, held in cash or a true offset account. If you’re highly geared, negatively geared, or self‑employed, aim closer to 12–18 months.

That’s on top of APRA’s 3% serviceability buffer the banks already use in their calculators – this is your own safety net, not theirs.

Notebook showing buffer months next to calculator and house keys Size your buffer in months of stressed costs, not just a round number.

Step 1: Understand the difference – APRA buffer vs your buffer

APRA requires banks to test your repayments at least 3 percentage points above the actual rate.

That protects the lender, not your lifestyle.

Your personal buffer is:

Cash or true offset you can access quickly if rates rise, rent falls, or income drops.

Think of it as your ability to self‑insure short‑term shocks without panic selling or fire‑sale refinancing.

Across multiple articles – from Green Square equity rules to Dover Heights upgraders – a consistent pattern emerges:

  • Model repayments at current rates +3%.
  • Keep total home + investment repayments around 30–35% of after‑tax income.
  • Hold 3–12 months of those stressed costs in cash or offset, depending on complexity and gearing (see points 10, 18, 19, 20 in the hub list).

When you’re geared, you simply push towards the upper end of that buffer range.

Step 2: How to calculate your “stressed” monthly cost

Use this simple formula:

  1. Work out your stressed repayment.

    • Take today’s rate and add 3%.
    • Use any online calculator to get the repayment.

  2. Add essential living costs.

    • Food, utilities, insurance, transport, kids’ basics.
    • Ignore holidays and upgrades.

  3. Include all geared loans.

    • Home, investment properties, and any business loans secured against property.

Example (round numbers only):

  • Home loan: $1.2m P&I at 5.8%, stressed at 8.8% → about $10,600/month.
  • Two investment loans (interest‑only): combined $1.4m at 6.4%, stressed at 9.4% → about $10,950/month.
  • Essential living (lean but realistic): $7,000/month.

Total stressed monthly cost = $28,550.

A 6‑month buffer = $171,300.
A 12‑month buffer = $342,600.

This is the kind of maths to run before you keep the old home as an investment or take on the next unit – see how we frame this for upgraders in /insights/keep-old-home-investment-upgrade-dover-heights.

Premium insight

The strategy continues below

You've seen the problem and the groundwork — now unlock the exact steps our CPA-certified brokers use, including 4 more sections. Enter your email for instant, free full access.

Free access. No spam — unsubscribe anytime. Your details stay confidential.

Frequently asked questions

Is six months of buffer enough when I’m geared into property?▾
Six months of stressed living costs and repayments can be enough if your LVR is moderate, your income is stable and your properties are only mildly negative. Once you add high LVRs, multiple properties, or self-employment, the risk climbs and a 9–12 month buffer is usually safer.
Should I prioritise building my buffer or buying the next investment?▾
For most investors, building a solid cash or offset buffer comes first. Without it, any shock to rates, rent or income can force panic selling or expensive refinancing. Once you’ve hit your target months-of-cost buffer, you can redirect surplus cashflow toward deposits or debt reduction.
Can I rely on redraw as my safety buffer?▾
Redraw is better than nothing, but it’s not ideal as your primary buffer. Lenders can change redraw terms, and mixing different uses in one loan can complicate tax deductibility. A true 100% offset account linked to your home loan generally provides more control, clarity and flexibility.

Speak with a specialist advisor

Confidential consultation, bespoke advice for your situation.

All insights