Fixed rate home loans with offset accounts let you lock in set mortgage repayments but also get the interest-saving benefits of an offset account. Offset accounts are more common on variable rate loans, and only a few lenders offer them on fixed rates too. Some of the current options are listed below.
Compare fixed rate home loans with offset accounts
A fixed rate loan with a 100% offset account lets you save money on the interest you pay. The balance of your offset account will offset your principal loan amount, and you don't pay interest on that portion of the loan. Any money you would normally pay as interest is paid towards your home loan principal instead – so you'll actually end up owning your home outright sooner.
Offset accounts are not offered on all fixed rate loans.
Donny’s offset account
Let’s compare 2 scenarios with Donny, our savvy borrower.
In the first example, Donny has a home loan with a rate of 5.0%. His loan size is $500,000 and his repayments are approximately $2,685 a month. He’ll pay a total of $966,279 over the 30 years that he has the loan, $466,279 of which is interest.
If Donny has an offset account and keeps $20,000 in it over the course of his loan, he would pay off his loan 1 year and 10 months earlier and would save $60,011 in interest. That means he'll own his home more than a year earlier, saving a full year of mortgage repayments – all because of a simple offset feature!
His repayments would still be the same, but more of each repayment would go towards the principal (the original loan amount).
Finder survey: How many Australians use an offset account?
Response
Yes
62.69%
No
37.31%
Source: Finder survey by Pure Profile of 1112 Australians, December 2023
How to compare these types of mortgages
Fixed term. Think about how long you want to be locked into the rate. Terms can range from 1 to 10 years. Choose a term you think you’ll be comfortable with, and remember that break fees are payable if you exit your loan before the term ends. If you plan to sell your property in the future, ensure that your fixed term accommodates this.
Fees. These types of loans may come with upfront and ongoing fees that could negate the savings you may make in the long run, so remember to take these into account.
Additional features. As well as an offset account, the home loan may offer you other features, such as a redraw facility, the ability to make additional repayments and discounts. Check to see if you stand to make any further savings.
Pros and cons of 100% offset accounts
Pros
With a fixed loan, your repayments will remain the same during the fixed interest rate period. If variable rates are increased, you won't pay more.
The balance you have in the offset account will be taken off your principal loan amount, actively helping to reduce the amount of interest you pay.
You can access and spend the money in your offset account at any time.
Cons
You’re unable to refinance during the fixed rate period without paying break costs, which can be expensive.
Offset accounts can come with account-keeping fees, so it's important to check whether the fees will be more than your potential savings.
You don't earn interest on an offset account like you would in a savings account. However, the interest you save on your home loan is usually at a much higher rate.
Frequently asked questions
Yes. The accounts are linked and you can nominate it as your chosen account, but keep in mind this would reduce the balance in your account and affect the interest you pay on your home loan.
No interest will be earned on the balance in your offset account.
Everyone's circumstances are different, so it's important to consider yours when looking at offset accounts. However, offset accounts are usually a key feature to have as part of your home loan as it reduces your monthly repayments all while you continue to save.
Although you won't earn any interest in an offset account, like you would a savings account, the interest you'll save on your home loan is usually at a much higher rate.
Yes, some banks will give you the option of having multiple offset accounts. However, look out for account fees as you may end up paying multiple fees for multiple accounts.
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As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Daily, Studio 10, nightly news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media.
While getting a 10-year fixed rate home loan might be a good idea if you want to keep your repayments the same over the next decade, you will pay more if interest rates drop.
Thirty year fixed rate home loans are a great way to lock in a great interest rate for the entirety of your loan but Australia doesn’t currently offer this lengthy loan option.
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