Why you need to consider using an offset account

Rates and Fees verified correct on October 20th, 2016

An offset account allows you to save thousands and shave years from your mortgage. Find out how shrewd Australians use them.

Attaching an offset account to your home loan is the accountant-inspired feature to make a portion of your interest payments disappear. If you want to pay off your mortgage sooner, a home loan with an offset facility can be a considerable option to reduce the interest payable against your outstanding loan balance and reducing down your overall debt levels. Learn more about how offset accounts work and when appropriate, compare home loans with 100% offset accounts.

How does an offset account 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:


In this 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.

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 to 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.

What is an offset account?

Video interview with Carla Baldock, Neil Manuel & Heidi Armstrong

Click here for video transcript:

Carla Baldock: An offset account is an account that is linked to your mortgage, and the balance of that offset account directly reduces the balance of your mortgage, therefore reducing the interest that you pay on your home loan.

Neil Manuel: What an offset account is, is a savings account that is taken up when you take out your home loan, and the savings account allows you to put your wages in it, any salary, any extra money that you get into the savings account. You don't actually need to apply that money into the actual home loan. Just by it being in your savings account, the offset savings account, it actually allows the interest that gets charged on the actual home loan to be reduced based on how much money you have held in that savings account.

Heidi Armstrong: An offset account really works as a separate account that sits alongside the loan account. A really important distinction is it doesn't form part of the loan account. And so what's so important about it? Well, the first thing is it's great. It works very much like a transactional account where you can pay your salary into the offset account, and you can pay your bills from the offset account. But the real benefit is that any money that you have in that offset account, not only is it working to reduce the interest that you would otherwise pay on your loan, but what it does is it doesn't reduce the overall balance of the loan. And that's important if you're particularly structuring your loan in a way to maximise tax effectiveness.

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.

Compare more 100% and partial offset accounts here

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

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


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.

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

People ask me, 'if I invest my cash in an online savings account and use the interest to pay off my mortgage, does that save me more loan interest than an offset account?' If the purpose is to payoff home loan debt, no is my answer. 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.

What sneaky 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.

Variable rate 100% offset account home loans

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

Switzer Home Loan

Switzer Home Loan

3 .89 % p.a.

variable rate

3 .89 % p.a.

comparison rate

Home Loan with Offset Account Offer

With the Switzer Home Loan you get a low variable interest rate, plus no application or ongoing fees. Plus a flexible 100% offset account facility.

  • Interest Rate of 3.89% p.a.
  • Comparison Rate of 3.89% p.a.
  • Application Fee of $0
  • Maximum LVR: 90%
  • Minimum Borrowing: $100,000
  • Maximum Borrowing: $3,000,000
Rates last updated October 20th, 2016
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Product nameInterest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.64% 4.39% $445 $0 p.a. 80% Go to site More info
Bankwest Complete Home Loan Package Fixed - 5 Year Fixed Rate LVR <90% (Owner Occupier)
Get the security of knowing your repayments with this 5 year fixed rate package home loan.
3.98% 4.35% $0 $395 p.a. 90% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.85% 4.23% $0 $395 p.a. 95% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
AMP Basic Package Variable Rate Loan - Owner Occupier
Interest only option available. No monthly fee basic variable loan.
3.98% 4.02% $350 $0 p.a. 90% Go to site More info
Bank of Sydney Expect More Package Loan - PAYG Variable (Owner Occupier)
A competitive product for owner occupiers with 100% offset account. Only available for Sydney, Melbourne and Adelaide metro postcodes.
3.64% 3.65% $0 $0 p.a. 80% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for Owner Occupier with 100% offset account and no application or ongoing fees.
3.73% 3.73% $0 $0 p.a. 70% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
A great variable package from NAB which includes offset and redraw features. No application fee.
4.40% 4.79% $0 $395 p.a. 95% Go to site More info
3.85% 4.26% $0 $395 p.a. 80% Go to site More info
IMB Essential Home Loan - LVR < 80% (Owner Occupier)
Get a discount on your rate and flexible repayment options with this loan.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Variable Rate - $750k+ P&I (Owner Occupier)
Enjoy discounted rates to a range of NAB products. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.35% 4.75% $0 $395 p.a. 95% Go to site More info
Switzer Investment Loan
An investment loan with no application or ongoing fees, and your very own lending service manager.
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.96% 4.61% $600 $0 p.a. 95% Go to site More info
ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
Lock in your rate for 2 years with an interest only option.
3.90% 5.06% $600 $10 monthly ($120 p.a.) 95% More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.84% 4.97% $0 $395 p.a. 95% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,000 cash back available for refinancers, conditions apply.
3.75% 5.03% $0 $395 p.a. 95% More info

As outlined in our example scenario, harnessing an offset account like your accountant does could save you $136,000 in interest and earn you 5 years and four months of debt-free home ownership.

Marc Terrano

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

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Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

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20 Responses to Why you need to consider using an offset account

  1. Default Gravatar
    Steve | July 14, 2015

    How does a visa card off set account work.

    • Staff
      Jodie | July 14, 2015

      Hi Steve,

      Thank you for your comment on, 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.


  2. Default Gravatar
    Chris | June 23, 2015

    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
      Belinda | June 24, 2015

      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.


  3. Default Gravatar
    Gary | February 13, 2015

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

    • Staff
      Marc | February 16, 2015

      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,

  4. Default Gravatar
    Irons78 | December 2, 2014


    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.

  5. Default Gravatar
    Robyn | September 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.?


    • Staff
      Marc | September 16, 2013

      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,

  6. 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?

    • Staff
      Shirley | July 31, 2013

      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,

  7. Default Gravatar
    Iwan | July 24, 2013

    Hi. We have two offset accounts. One with our home and the other with my Investment property. Just wondering can I have two offset accounts for each property or can I have only one an offset account link to my home and IP. Cheers

    • Staff
      Jacob | July 24, 2013

      Hi Iwan. Thanks for your question. You can only have one offset account linked to each mortgage. So if you have a mortgage for your principle place of residence, you can have an offset account linked to that loan. And if you were to get another loan for your investment property, you can have an offset account linked to that mortgage too. I hope this helps. Jacob.

  8. Default Gravatar
    Carroll | July 15, 2013

    Hi Adrian,
    are there any mortgage lenders out the that allow
    multiple offset accounts on a home loan?

    • Staff
      Shirley | July 15, 2013

      Hi Carroll,

      Thanks for your comment.

      To our knowledge, it is standard for home loans to have one offset account linked to it.


  9. Default Gravatar
    Karen | July 9, 2013

    I am considering taking half of my 200,000 loan out of the offset account with Westpac and putting it into a fixed rate account as the interest rate is lower however I am concerned whether this is the right decision at this time.

    • Staff
      Shirley | July 9, 2013

      Hi Karen,

      Thanks for your comment. is an online comparison site so we’re not licensed to give you personalised financial advice.

      You may want to consider speaking to a financial advisor and this page may provide some helpful information about the pros and cons of fixed and variable rate home loans.

      Hope this helps,

  10. Default Gravatar
    | July 8, 2013


    I owe 159,000 on my home loan and 12,000 on a Viridian account. Currently paying 450 a week on home loan and 150 a week on Viridian that we used for Reno. I want to combine the two amounts to pay 600 a week this way reducing interest and length of loan. Current lender not very helpful with this. I am self employed and do not have 2 years financials that they are requesting. I find this a bit farcical as they loan us the money to start with.

    I would appreciate your comment on this.



    • Staff
      Shirley | July 9, 2013

      Hi David,

      Thanks for your comment.

      I’m assuming that both your loans are with the same lender, and that the lender won’t let you consolidate your loans together so you can pay them both out with one repayment.

      You may want to consider any low doc options that your lender can provide you with, as they are suitable loans for the self employed.

      Otherwise, you may want to consider refinancing to consolidate your debts – but this step should be taken after you’ve discussed all your options with your current lender first because there are a lot of costs involved with refinancing.

      Hope this helps,

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