free-offset

Home loans with free offset accounts

Pay off your home loan earlier than you had originally planned with a free offset account.

A home loan with a free offset account works much like a home loan with a linked transaction account but with one major difference: it allows you to save money by reducing the amount of interest being charged on your loan balance.

With this type of free feature added to your home loan, more money is applied to your principal balance with each monthly repayment that you make.

Offset home loans comparison

Rates last updated May 25th, 2018
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Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.54%
3.58%
$0
$0 p.a.
80%
Eligible borrowers can get $900 cashback on this loan with a 100% offset account and a redraw facility.
3.64%
3.84%
$0
$0 p.a.
70%
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.73%
3.73%
$0
$0 p.a.
80%
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.69%
3.94%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.59%
3.99%
$0
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.69%
4.09%
$0
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
3.84%
4.17%
$0
$395 p.a.
80%
Lock in a competitive rate for owner occupiers for two years. Extra repayments up to $30,000 over the life of the fixed period can be made.
4.39%
4.78%
$0
$395 p.a.
95%
A low deposit package home loan. Combine your loan to get discounts on your interest rate and other NAB financial products.
4.09%
4.49%
$0
$395 p.a.
90%
Enjoy all the benefits of a full-featured package investment loan, including a 100% offset account.
4.57%
4.94%
$0
$395 p.a.
95%
No application fee and 100% offset account.
4.34%
4.74%
$0
$395 p.a.
95%
Enjoy discounted rates on a range of NAB products with a package loan. Get this loan with a 5% deposit.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.89%
4.96%
$0
$395 p.a.
95%
Refinancers can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Points on your mortgage (for a limited time, subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.89%
4.97%
$0
$395 p.a.
95%
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term.
4.40%
4.80%
$0
$395 p.a.
80%
A discounted variable loan package for under $500 000 home loans.

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How does a home loan with a free offset account work?

As mentioned, an offset account functions as a regular transaction account which is linked to your home loan. If the account is a 100% offset account, any funds in it will offset the interest charged on your home loan. For example, holding $10,000 in your offset account on a home loan of $200,000 will see interest-only charged on $190,000.

This means that the daily interest on your loan is calculated on a smaller amount. This type of account will save you money on interest and help you to pay off your loan faster than expected.

Offset accounts can be free or charge monthly fees. If your offset account is being offered with no monthly or annual fees, you will save even more money over the lifetime of your home loan.

Offset Accounts Guide

How do I compare mortgages with free offset accounts?

  • Fees and interest rates. When looking at a home loan that offers an offset account, be sure that you are not going to be charged any other fees for this service, such as higher annual fees or application fees, or higher interest rates. Also be sure to look into the comparison rate in addition to advertised interest rate, as this takes into account some of the fees due.
  • Percentages. You'll find some lenders that are only offering offset accounts at low percentages. To get the full benefit of such an account, you want to make sure that 100% of your transaction account balance is being deducted from the balance of your home loan before the interest for the day is calculated.
  • Accessibility. Make sure that you are able to withdraw and deposit funds from your offset account where you'll want to access them, such as ATMs, online and with a teller.
  • offset account fees. While you may not be charged any fees for having your offset account, the bank could try and make up for it with fees for different transactions or to receive statements. Compare things such as monthly charges, cheque fees and charges for ATM use when comparing different lenders’ offset accounts.

Case study

Jim's offset account search

interest-free

Jim applies for a home loan with an interest rate of 5.5%p.a., with an offset account but first wants to make sure that not only are there no added fees being charged for this feature but that he's getting a 100% offset account.

Jim has a smaller loan balance of $150,000 and plans to keep $5,000 in the linked offset account. With a 100% offset account, the interest rate would be applied to a balance of only $145,000. If Jim finds a home loan with only a 50% offset account, interest would be applied to the amount of $147,500 as only half of the $5,000 would be applied against the principal balance.

Jim uses the finder.com.au home loan offset calculator to find out how much this balance would save him over the 15 years of his loan.

The calculator shows that Jim will pay his loan off five months earlier and save $2,200 in interest. If he bumps his offset account balance up to $10,000, he would save nine months off his home loan and save $4,268.98.

Pros and cons of a home loan with an offset account

Pros

  • Pay off your loan quicker. When used right, an offset account can allow you to pay off your home loan faster than your original terms.
  • Save money on interest. By having your account balance deducted from your loan amount, you are being charged less in interest fees with each repayment.
  • Flexible transaction account. With an offset account you also get all of the flexibility and options that you expect with a transaction account. You can have your salary paid into it directly, and use your account for a variety of purchases.

Cons

  • Interest earned. The balance of your offset account won’t be earning interest like it could in other types of transactions accounts. This is usually outweighed by the fact that most savings accounts will offer an interest rate lower than that of your home loan, meaning you actually gain more from placing funds in your offset account as opposed to a savings account.
  • Fees. Check for any fees associated with the transaction account you plan to use. Even if you're not charged monthly fees for having an offset account, there might be fees for different transaction types or services.

What should I avoid when it comes to home loans with free offset accounts?

  • Low offset percentage. When looking into a home loan that offers a free offset account make sure that it is a 100% offset account. If not, you will not be getting the full benefit of this feature.
  • High-fee transaction account. Avoid linking a transaction account that has high monthly or annual fees. These can quickly eat into the savings you get from reducing the interest amount of your home loan.

Frequently asked questions

The interest on a home loan is typically calculated on a daily basis and then added together at the end of each repayment period.

Redraw is a feature that allows you access to funds that you have already paid towards your home loan as an extra repayment. The money you have saved in an offset account is separate from your home loan, allowing you to add to it or withdraw from it at will. For more information about the differences between the two read our guide.

Marc Terrano

Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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