Offset account home loans

What is an offset account? It's a home loan feature that helps you pay less interest, own your home sooner and access your money when you need it.

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Compare home loans with offset accounts

An offset account is a transaction account linked to your home loan. When you hold money in an offset account, it reduces the interest you pay on your mortgage, helping you to pay it off sooner. All the loans in the table below have offset accounts (keep in mind that some may charge a small offset account fee).
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years
Name Product Interest Rate (p.a.) Comp. Rate p.a. Fees Monthly Payment

homeloans.com.au Low Rate Home Loan with Offset P&IHome≥ 20% Deposit

homeloans.com.au Low Rate Home Loan with Offset
2.24%
2.24%
  • App: $0
  • Ongoing: $0 p.a.
$574
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.

Nano Variable Home Loans P&IHome≥ 20% Deposit

Nano Variable Home Loans
1.99%
1.99%
  • App: $0
  • Ongoing: $0 p.a.
$555
Competitive rate with zero fees, fast approval and a 100% free offset account. Available for refinancers and existing buyers purchasing their next home. 20% deposit required.

Macquarie Bank Offset Home Loan Package P&IHome≥ 40% Deposit

Macquarie Bank Offset Home Loan Package
2.39%
2.67%
  • App: $0
  • Ongoing: $248 p.a.
$586
A sharp variable rate with low fees for borrowers with 40% deposits or refinancers with equity in their properties. Refinancers can switch with a convenient digital application.

Nano Variable Home Loans IOHome≥ 20% Deposit

Nano Variable Home Loans
2.49%
2.17%
  • App: $0
  • Ongoing: $0 p.a.
$594
An interest-only loan for owner-occupiers with 20% deposits or equity. This loan has no fees. Available for refinancers and existing buyers purchasing their next home.

Speak to a broker about your options

Consultant

ME Flexible Home Loan Fixed with Members Package P&IHome 2Y Fixed≥ 20% Deposit

ME Flexible Home Loan Fixed with Members Package
4.59%
3.59%
  • App: $0
  • Ongoing: $395 p.a.
$770
$3,000 cashback when refinancing a loan of $250,000 or more. Other conditions apply.
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.

G&C Mutual Bank Momentum Home Loan P&IHome≥ 40% Deposit

G&C Mutual Bank Momentum Home Loan
2.24%
2.26%
  • App: $0
  • Ongoing: $0 p.a.
$574
A variable rate loan for owner-occupiers looking to refinance. This loan has low fees and a 100% offset account.

Newcastle Permanent Building Society Premium Plus Package Home Loan P&IHome≥ 20% Deposit

Newcastle Permanent Building Society Premium Plus Package Home Loan
2.94%
3.34%
  • App: $0
  • Ongoing: $395 p.a.
$629
Get up to $3,000 refinance cashback when your LVR is 90% or lower ($2,000 cashback for loan amounts of $250K+ and above, $3,000 for $500K+). Other conditions apply.New borrowers or refinancers can get a discounted rate with this package loan.

homeloans.com.au Low Rate Home Loan with Offset P&IHome≥ 40% Deposit

homeloans.com.au Low Rate Home Loan with Offset
2.14%
2.14%
  • App: $0
  • Ongoing: $0 p.a.
$567
A competitive rate with no application or ongoing fees. This loan is not available for construction.

Nano Variable Home Loans P&IInvestment≥ 20% Deposit

Nano Variable Home Loans
2.29%
2.29%
  • App: $0
  • Ongoing: $0 p.a.
$578
Investors can get this no-fee variable rate loan. You will need a 20% deposit. Fast online approval. Available for refinancers and existing buyers purchasing their next property.

homeloans.com.au Low Rate Home Loan with Offset P&IInvestment≥ 20% Deposit

homeloans.com.au Low Rate Home Loan with Offset
2.39%
2.39%
  • App: $0
  • Ongoing: $0 p.a.
$586
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account. This loan is not available for construction.

loans.com.au Smart Booster Discount Variable Home Loan P&IHome≥ 20% Deposit

loans.com.au Smart Booster Discount Variable Home Loan
2.24%
2.72%
  • App: $0
  • Ongoing: $0 p.a.
$574
Home buyers can get a very low discounted variable rate for the first year. Requires a 20% deposit. Add an offset sub-account for an additional 0.10% on your interest rate. Get your loan processed fast and settle within 30 days.
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What is an offset account?

An offset account is a bank account, but instead of earning interest for you, it reduces the interest you pay on your mortgage. Every dollar you have in your offset account will reduce the amount of interest you pay while it's in your account. This means the interest you pay will be calculated on a smaller principal amount, saving you money.

You don't earn interest on an offset account, but the interest you save is usually at a much higher interest rate than you'd earn in your bank account.

How does an offset account work?

If your loan amount is $500,000 and you save $1,000 in your offset account, your lender will calculate your daily interest charges on $499,000.

As long as that $1,000 remains in the offset account, you won't be charged interest on that amount of your home loan.

The more money you have in your account, the greater the financial savings will be.

What makes offset accounts extremely useful is that they let you build up your savings account, access and spend your cash when you need it, and repay your home loan faster.

But not all mortgages come with this feature – you need to make sure you get a loan that is eligible to have an offset account..

Regular mortgage - no offset account

  • Loan amount: $500,000
  • Interest rate: 2.8%
  • Loan term: 30 years
  • Monthly repayment: $2,054
  • Total loan cost (including interest) = $739,610

Mortgage with an offset account

  • Loan amount: $500,000
  • Savings in offset account: $20,000
  • Interest calculated on: $480,000
  • Monthly repayment: $2,054
  • Total loan cost (including interest) = $714,450
  • Interest savings with offset = $25,159 less over the life of the loan

How to save the most money with an offset account

How much you can save using an offset account depends on your loan amount, interest rate, how much money is in the offset account, when you put it there and how long it stays there. But there are a few things you can do to maximise your savings when using an offset account:

  • Add money early. If you add $10,000 to your offset account at the start of a 30-year loan, it will save you more than if you added that money 5 years into the loan. Any amount, even $1,000, will have an impact over the long term.
  • Add money often. If you can add extra savings into your offset account regularly, you'll save even more in interest. If you can, have your salary or wages paid directly into your offset account, so your money is offsetting your interest during the month (before you spend it!).
  • Limit withdrawals. If you need to pull money out of your offset account, you can, and it's easy to do. It's just like withdrawing money from any bank account. This will readjust the calculation on your loan repayments, so try to keep as much money in the account as you can. For example, pay bills on the last possible due date, so your money is offsetting your interest for a few more days.

Offset account calculator

Use our calculator below to estimate how much time and money an offset account could save you. Just enter your mortgage details, the amount you will put into the offset account and how far into your mortgage you currently are.

Offset savings calculation: How much could you save?

Here are some hypothetical mortgage scenarios showing how much time and money a single amount of cash in an offset account can save you. Note that all these estimates assume a 30-year mortgage, with the offset money saved 2 years into the mortgage.

Loan amountInterest rateOffset savingsAmount of interest savedYears saved on your 30-year loan term
$350,0003.25%$34,000$44,7102 years, 5 months
$450,0002.59%$50,000$47,3782 years, 2 months
$600,0002.90%$40,000$46,4051 year, 7 months
$800,0003.00%$50,000$61,1411 year, 6 months

Should I make extra mortgage repayments or put the cash into an offset?

At first glance, using an offset account seems similar to making extra repayments on your mortgage and just using your loan's redraw facility to pull money out as needed. In both situations, you get a reduction in interest charges, you pay off your loan faster, and you still have access to your money – in theory.

But an offset account actually offers you more flexibility and control. The key difference is that money in an offset account belongs to you. Extra repayments belong to your lender. Redraw facilities can come with restrictions or fees, and your lender can change the rules at their own discretion and make it harder for you to access the money.

Money in an offset account may also give you greater tax deductions if you convert your home into an investment property.

Learn more about redraw vs offset

How an offset account works when... selling your old home and buying a new one?

It's hard to time the sale of your old home so that it lines up with the purchase of a new one. And until your home sells, you may not have a deposit to cover the new purchase. Many buyers in this situation take out a bridging loan.

But if you have an offset account and you've been making regular payments, you may have access to enough savings to withdraw and use as a deposit on your next property.

How an offset account works when... turning your home into an investment?

Let's say you decide to convert your current home into an investment property while you buy a new home.

If you have paid off most of your mortgage, that means you won't have many interest expenses to claim at tax time. You could then end up paying extra tax, as the rental income you receive for your investment property will be added to your own taxable income.

But if you put your savings into an offset account instead of making extra repayments towards your loan, you can withdraw those savings at any time. This means you'll be paying maximum interest again, all of which is tax deductible on an investment loan. You can then use your savings to help you purchase your new owner occupier home.

What if my offset savings are equal to my loan amount?

If you save enough money, over many years, your offset savings could eventually equal the amount that you owe on your home loan. This is obviously a great position to be in! But you have to decide what to do next.

You've essentially paid your mortgage off and if you want to end the home loan, you can move the offset savings over to the loan and then discharge the mortgage. Now you're debt-free.

However, all of your offset savings have now been spent. If this is the bulk of your savings, you will suddenly be very low on cash, which leaves you financially vulnerable if an emergency or unexpected expense arises.

You could decide to repay most of the loan, leaving some savings accessible while you repay the final loan amount. Or you could keep going with all of your savings off-setting your loan. This means that every mortgage repayment you make will just be paying down the loan's principal, and you won't be paying any interest at all.

If you're not sure what the best option is for you, consider speaking to an experienced mortgage broker.

More articles and guides on offset accounts

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    28 Responses

    1. Default Gravatar
      KATOctober 12, 2017

      Can your deposit sit in an offset account? For instance if I were to purchase a $650K property using a loan of $400K plus savings of $250k as deposit, could that $250k deposit money sit in an offset account thus reducing the interest chargeable amount to $150k?

      • Default Gravatar
        JonathanOctober 13, 2017

        Hello Kat,

        Thank you for your inquiry.

        Unfortunately, it is not as an offset account is a transaction account that can be offered as part of your home loan package and can be withdrawn anytime and not locked in. The initial deposit you have paid for the property is already on the lender’s books.

        If you wish to have an offset account connected to your mortgage, we advise that you speak to your lender of choice or to a mortgage broker to see your options. They can lay down the numbers you need to have a clearer view.

        Hope this helps.

        Cheers,
        Jonathan

    2. Default Gravatar
      DannySeptember 25, 2017

      Hi,
      Currently I have mortgage that is splitted to a variable and a fixed loan. The variable has an offset account. My question is that what are the benefits of using an offset instead of putting the savings into the variable account.
      Example, I have 20K savings, and -40K in the variable account. If I put 20K into the variable account, the balance is -20K, so the effectively, the interest rate paid is the same as using the offset account.
      Could you please help?
      Thanks.

      • Default Gravatar
        DanielleSeptember 25, 2017

        Hi Danny,

        Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

        Offset accounts are commonly associated with variable rate home loans, but the competitive nature of the home loan market means this feature is available with some fixed rate home loans. These home loans can provide the stability of a fixed interest rate and reduce the amount of interest you pay at the same time. While this repayment method is suitable for borrowers who have just entered the market, such as first home buyers, using this home loan as a hedging strategy may not be as effective. Variable interest rates fluctuate according to economic conditions and unless you’re an economic expert, predicting when interest rates fall or rise is no easy task. Either way you’ll still have the benefit of the offset account to reduce your principal. Now, offset accounts are considered to be deposit products. Therefore, they are considered investment accounts. In order to determine whether an offset account is better for you or not, you should not take any information provided within this article as financial advice. Rather, you should discuss your situation with a licensed financial advisor and work out whether an offset account might be right for your own personal financial situation or not.

        I hope this helps.

        Cheers,
        Danielle

    3. Default Gravatar
      DiApril 28, 2017

      What happens if you have more money into your offset account than you have owing on your mortgage?

      Is there an upper limit to the amount of money you can have in an offset account?

      • Default Gravatar
        LiezlApril 28, 2017

        Hi Di,

        Thank you for your question.

        If your offset account balance is bigger than your outstanding mortgage, your loan payments will be applied fully to the principal. This is because your mortgage will not accrue interest at this point. Kindly note that the balance of this offset account doesn’t earn interest.

        As for the balance limit, it would be best to check this with the bank or lender as they might have set a maximum limit.

        I hope this has helped.

        Best regards,
        Liezl

    4. Default Gravatar
      RajJanuary 9, 2017

      If you are on interest only loan and have 100% offset attached. how the repayments would be affected. As an example you have a loan of $400,000 for years @ 4% with repayment of 1333.33. if you have another 20,000. How the repayments would work. From the above example, repayments don`t change, then how the 20K offset balance help?

      • Avatarfinder Customer Care
        MayJanuary 12, 2017Staff

        Hi Raj,

        Thank you for your question and for contacting Finder!

        Usually, with the interest-only offset, the balance in your offset savings account is offset against the amount owing on your home loan. For instance, you owed $400,000 on your mortgage and at the same time you had a $20,000 balance in your linked offset savings account, you would only be required to pay interest on an amount of $380,000.

        Please feel free to read our through our Interest-only offset accounts for more details.

        Hope this has answered your question.

        Cheers,
        May

    5. Default Gravatar
      SteveJuly 14, 2015

      How does a visa card off set account work.

      • Default Gravatar
        JodieJuly 14, 2015

        Hi Steve,

        Thank you for your comment on finder.com.au, a financial comparison website.

        The Visa debit-card is simply the type of card you may be able to attach to your offset account to allow you access to the funds you have put in there if you need it, it would still function as your typical offset account in terms of any funds you have deposited in this account working to help save you interest on your home loan.

        Regards
        Jodie

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