If you have a home loan you need to consider using an offset account

Rates and fees last updated on

An offset account could save you thousands and shave years off your mortgage.

Attaching an offset account to your home loan makes a portion of your interest payments disappear. Better still, you can save your money and still have access to it at the same time.

You can start comparing loans with offset accounts in the table below or jump ahead to learn more about how offset accounts can save you money.

Compare variable rate 100% offset account home loans

Offset accounts could potentially save you thousands in mortgage repayments over the life of your home loan.

Rates last updated November 24th, 2017
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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
3.62%
3.64%
$0
$0 p.a.
80%
This loan is for refinancers only. Switch from your current loan to this low-rate, flexible and feature-packed refinance special.

3.58%
3.59%
$0
$0 p.a.
80%
A competitive variable rate product with low fees offered by a 100% online lender.
3.62%
3.64%
$0
$0 p.a.
80%
Get a low interest variable home loan with no application fee.
3.69%
4.01%
$0
$299 p.a.
95%
A loan with no application fee and borrow up to 95% LVR.
3.64%
4.03%
$0
$395 p.a.
80%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
A low interest rate home loan that allows borrowers to borrow up to 80% of the property value.
3.69%
3.72%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.72%
3.74%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
3.79%
3.82%
$0
$0 p.a.
90%
A home loan with a special rate for owner occupiers. Free offset account.
3.97%
3.97%
$0
$0 p.a.
90%
A competitive variable rate home loan with no ongoing fees.
3.79%
4.11%
$0
$299 p.a.
80%
A fully featured home loan with an offset account and discounts available.
$0
$0 p.a.
A basic low-rate home loan that still offers some useful features.
3.73%
3.73%
$0
$0 p.a.
70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
4.29%
4.32%
$600
$0 p.a.
90%
Borrow up to 90% LVR and pay no ongoing fees with this investment loan.
3.94%
3.71%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
3.84%
4.58%
$445
$0 p.a.
90%
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.99%
4.02%
$600
$0 p.a.
90%
Take advantage of a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
4.05%
4.09%
$0
$0 p.a.
90%
A basic variable loan with no monthly fees.
4.34%
4.74%
$0
$395 p.a.
95%
Enjoy discounted rates to a range of NAB products. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.19%
4.19%
$0
$0 p.a.
90%
Get access to a redraw facility and offset account without the annual fee.
4.04%
4.06%
$0
$0 p.a.
90%
A home loan with no ongoing fees. This loan is available for refinances and purchases.
4.39%
4.78%
$0
$395 p.a.
95%
Package your home loan to get discounts on your interest rate and other financial products.
4.57%
4.94%
$0
$395 p.a.
95%
No application fee and 100% offset account.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
4.40%
4.80%
$0
$395 p.a.
80%
A discounted variable loan package for under $500 000 home loans.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.

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How do offset accounts work?

An offset account is a transaction account attached to a home loan. The balance of a 100% offset account is taken away from the principal remaining on the loan for interest calculation.

Here is a breakdown of how a 100% offset account works:

This diagram explains how Offset accounts work

In this hypothetical situation, interest is applied to $130,000 instead of the full $150,000 owed. As savings grow, the amount saved on interest also grows. Effectively, this reduces the amount of interest charged over the life of the loan.

What is an offset account? Watch our summary below

Why should I consider an offset account?

An offset account may save you interest and cut the length of a home loan. It will work best for people who can maintain a decent balance in their offset account and contribute further to it over time. It is worth shopping around, as offset accounts can differ in inclusions and fees.

Will a home loan with an offset account cost me more than a standard home loan?

Traditionally, home loans with offset accounts would either attract a higher interest rate or higher fees and sometimes both. However, with the emergence of smaller online lenders, many loans are feature-packed with market leading rates. Major lenders still tend to charge a premium for offset accounts, so it is worth shopping around.

Are there different types of offset accounts?

Yes, there are 100% offset accounts and partial offset accounts:

  • 100% offset accounts are the most common form. As explained in the above table, the balance of the offset account is deducted from the outstanding principal before interest is calculated. The balance of this offset account doesn't earn interest.
  • Partial offset accounts can be explained as an online savings account where the interest which would be generated by the balance pays off the principal of the loan, without the borrower having to pay tax on the interest. A 100% offset account can be a far more effective tool for reducing the interest paid on a loan.

How much interest can I save by using an offset account?

Below is a hypothetical loan scenario comparing the same loan without and with a 100% offset account.

comparing-offset-without-offset2

From this example, taking the loan with an offset account saves a whopping $136,000 over the life of the loan. It also reduces the term of the loan from 25 years to 19 years and 8 months. Owning a home outright, debt free, is a goal that is well worth fast-tracking. Especially as first time buyers are waiting longer to plunge into the property market.

What fees do I need to be aware of?

Some offset accounts charge fees on standard transactions. It is well worth putting the research in as to whether the home loan you're applying for has a dud transaction account.

Offset tips

  • Savings

Build up your offset savings account by making regular deposits using your income, rental earnings or any other money you accumulate.

  • Long-term benefits of Offset Accounts

If you move into a new house but hold on to your previous property then you can turn your mortgage into an investment loan if you rent your property out to new tenants. The investment loan will be tax deductible.

I have a few more questions about offset accounts

Do my repayments get smaller with an offset account?

No, your repayments will stay the same with an offset account.

What will change is the proportion of the amount of your repayment which goes towards the loan amount, and the amount that goes towards interest.

Because the offset account lowers the interest due on your loan, more of your repayment goes towards the actual loan amount, known as the 'principal'.

How can I use an offset account as a buffer?

An offset account can be used to build a buffer of repayments and help pay a loan off even earlier.

Borrowers who do this will take out a regular 30 year loan and then pay it off like a 20 or 25 year loan.

To do this, a borrower would pay the the minimum repayments as usual, and then pay any extra amounts into the offset account. This gives them access to the funds in the event that they need the money, and gives them the extra wiggle room of lower repayments in the event that they have income issues or rates rise and they must stop making extra payments.

To find out what repayments would be on a 20 or 25 year loan, use our loan repayment calculator.

Is an offset account available through a trust?

Yes, some lenders do offer offset accounts on trust home loans. The policies surrounding this will differ depending on the lender, so be sure to raise this with your lender or broker first.

Should I use an offset account or invest in an online savings account?

The choice will depend on you. Generally speaking online savings accounts earn less in interest than lenders charge in interest for home loans. And, with a savings account, tax will be paid on the interest earned.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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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 advice 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.

    • Staff
      DanielleSeptember 25, 2017Staff

      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?

    • Staff
      LiezlApril 28, 2017Staff

      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
    January 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?

    • Staff
      MayJanuary 12, 2017Staff

      Hi Raj,

      Thank you for your question and for contacting finder.com.au we are a financial comparison website and general information service we are not mortgage specialists so can only offer general advice.

      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.

      You can find more information on this interest-only offset account home loan on this page.

      Hope this has answered your question.

      Cheers,
      May

  5. Default Gravatar
    SteveJuly 14, 2015

    How does a visa card off set account work.

    • Staff
      JodieJuly 14, 2015Staff

      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

  6. Default Gravatar
    ChrisJune 23, 2015

    Hi,
    Whats the difference between leaving money in an Offset Account and just paying off the loan with that money?
    I appreciate the Offset money is readily available and can be used like a transaction account, but is there a difference in interest saved or time saved in paying off the loan?

    • Staff
      BelindaJune 24, 2015Staff

      Hi Chris,

      Thanks for your enquiry.

      An offset account reduces the overall interest payable against your outstanding loan balance as it effectively ‘offsets’ the amount of interest you pay on your mortgage.

      For instance, if you have a 100% offset account and have $10 000 in savings in the account and your mortgage balance is $300 000, your interest charges will be calculated on the balance of $290 000.

      There are many benefits to keeping funds in your offset account rather than your home loan, such as the fact that accessing money through a redraw can come with minimum redraw amounts and fees which could make an offset more attractive than making additional repayments on your mortgage.

      On this page, you can use our home loan offset calculator to estimate how much an offset account could reduce your interest payable and how it reduce the time taken to repay your loan.

      Thanks,
      Belinda

  7. Default Gravatar
    GaryFebruary 13, 2015

    Hello,
    I would like to know who can check my bank loan interest

    • Staff
      MarcFebruary 16, 2015Staff

      Hi Gary,
      thanks for the question.

      You can check how much interest you’re paying on your home loan by looking at your most recent bank statement. Alternatively, you can also call your lender to see what your current rate is.

      I hope this helps,
      Marc.

  8. Default Gravatar
    Irons78December 2, 2014

    Hi

    My PPOR has now turned into an IP ? I have a fixed loan of approx $170k and a variable loan (VL) of approx $135K. I currently have approx $70k in savings. I also have an offset a/c to use if necessary.

    I’m unsure whether to continue using my existing savings in the offset a/c (currently 4.85%) and pay off the loan (I currently have the capacity to pay $3k per month in addition to my mortgage repayments) but I believe as a result of this method, it will reduce the loan interest and each year my income tax will potentially increase. I believe my other option is to use my existing savings and put them in a high interest savings acct (currently 4.02%) and deposit my additional monthly savings there, thereby the loan interest remains as high as possible for a better tax deduction and I will also pay minimal income tax on the savings earned.

  9. Default Gravatar
    RobynSeptember 15, 2013

    Can withdrawals be made from an offset mortgage account or is it locked in for a period of time or notice needs to be given etc.?

    thanks

    • Staff
      MarcSeptember 16, 2013Staff

      Hello Robyn,
      thanks for the question!

      Most offset accounts function like a transaction account, meaning you get a linked debit card which you can use to make withdrawals or payments at any time.

      I hope this helps,
      Marc.

  10. Default Gravatar
    July 30, 2013

    I don’t have an offset account for my loan, but all money I have sitting on the loan. Are those available funds are doing a same job in offsetting the interest on the loan or there is a difference?
    What is better?
    Thanks

    • Staff
      ShirleyJuly 31, 2013Staff

      Hi Miro,

      Thanks for your comment.

      Since you don’t have an offset account with your home loan the money in your loan won’t be offsetting the interest on the loan.

      To determine whether an offset account is right for you, please see this page.

      Hope this helps,
      Shirley

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