Get the Finder app 🥳

Track your credit score, free

Free

Should I pay off my mortgage or leave money in my offset account?

Keeping money in your home loan offset account could actually give you more options than paying it off.

Updated

Fact checked

The faster you get out of mortgage debt the better off you'll be. But if you've paid off (or are close to paying off) your mortgage through your offset account you actually might want to keep your mortgage a bit longer.

Here's an example. You have a $400,000 mortgage and you've almost paid it off. But instead of repaying the loan you've put $390,000 into your loan's offset account. Effectively, this is the same as paying it off.

But now you have two options:

  1. Pay off your mortgage. Keep adding to your offset account until you reach $400,000 and then pay off the loan. You're out of debt. But all the money in the offset is gone.
  2. Keep it open. Keep adding to your offset account, but don't close out the loan. Your debt is small and you have a lot of money you can easily access.

Here's the thing about money: while your home might be worth more a lot, it's much harder to turn bricks into cash when you need it. But the money in your offset account is yours and you can spend it quite easily.

Keeping money in your offset account versus just paying off the mortgage

Keeping money in your offsetPaying off your home loan
  • Flexibility. If your remaining mortgage debt is small then it's not costing you much to keep it. And you can use the money in the offset account for emergencies, investments or other expenses.
  • Interest. Withdrawing money from your offset account means you pay more interest.
  • No debt. You're out of debt and you own your own home.
  • Emergency fund. If something goes wrong you can easily take money out of your offset account and spend it fast. If you have a separate account with money in it for emergencies, then this is less of an issue.
  • No rainy day fund. As soon as you pay off your mortgage all the money in your offset account is gone. Congratulations, you own your own home. But it's hard to take money out of your house.
  • Ongoing fees. If your mortgage has ongoing fees you'll keep paying them as long as you keep the mortgage. This cost could be worth it, but it's something you need to consider.
  • No fees. No mortgage means no fees. Easy.
  • Buying another property. If you decide to move or buy a second property you can use the funds from your offset account to cover the deposit fairly easily.
  • Investing opportunities. You could buy a second property and live in it while turning your current home into an investment. This allows you to shift money to the mortgage on your new home and keep paying off the investment (this is advantageous because you can deduct interest expenses on an investment property from your tax).
  • Buying another property. It can be harder to sell your property then buy a new one. If it doesn't work out you might need a bridging loan or a line of credit to fund to cover your deposit. This means extra work and potentially extra costs.
  • It can get complicated. Having a mortgage is just one more thing to worry about, and this strategy does require you to pay more attention to your finances (and makes your finances more complicated).
  • It's easy. If you just want to get out of debt then you might want to just repay the mortgage and never hear the word "mortgage" again.

The above information might not apply to you, of course. Your loan might not have an offset account, in which case you've just been paying your loan off. And you might have extra savings set aside, meaning the flexibility of the offset account is less important to you.

And you might be the kind of person who just wants to close their mortgage and move on with their lives. And that's totally understandable too.

Max's Mortgage

Mortgage vs offset - maxMax has $150,000 left to repay on his mortgage. He also has $150,000 saved in a linked 100% mortgage offset account.

But thanks to the balance in the offset account cancelling out his outstanding debt, Max doesn't have to pay any interest on the loan amount. So rather than paying off the loan in full, he could keep making his regular loan repayments and then access the $150,000.

He decides to put the money he is saving on interest repayments into a high-interest savings account to further boost his savings balance. Later on, when Max's car breaks down he pulls $10,000 out of the offset account to buy a new car. His offset dips down to $140,000, meaning he has to pay interest on the $10,000 as he pays it back. But this is still much cheaper than getting a car loan.

Whether or not you will be better off paying off your loan or keeping the money in your offset account depends on a range of factors, including your financial circumstances and how you feel about keeping a mortgage in place for any longer than necessary. Chat to a financial planner to get advice tailored to your personal situation and needs.

More helpful mortgage guides

Compare mortgages with 100% offset accounts

Data indicated here is updated regularly
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
homeloans.com.au Low Rate Home Loan with Offset - LVR 60% to 80% (Owner Occupier, P&I)
2.54%
2.56%
$0
$0 p.a.
90%
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.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR ≤80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
ING Orange Advantage Loan - $500k to $1M (LVR ≤ 80% Owner Occupier, P&I)
2.54%
2.89%
$0
$299 p.a.
80%
Get a 100% offset account and rate discounts for higher borrowing amounts.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.44%
2.46%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.73%
2.78%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
ING Orange Advantage Loan - $150k to $500k (LVR ≤ 80% Investor, P&I)
3.24%
3.57%
$0
$299 p.a.
80%
Investors can enjoy a 100% offset account, a redraw facility and flexible repayments.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer Discount 1 ($150k+ Owner Occupier, P&I)
2.94%
3.34%
$0
$395 p.a.
95%
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
G&C Mutual Bank Momentum Home Loan - LVR <50% (Owner Occupier, P&I)
2.55%
2.57%
$0
$0 p.a.
A variable rate loan for owner-occupiers looking to refinance. This loan has low fees and a 100% offset account.
ING Orange Advantage Loan - $150,000 to $500,000 (LVR ≤ 80% Owner Occupier, P&I)
2.54%
2.89%
$0
$299 p.a.
80%
Get a 100% offset account and a competitive, variable interest rate, plus no application fee.
homeloans.com.au Low Rate Home Loan with Offset - LVR 60% to 80% (Investment, P&I)
2.69%
2.71%
$0
$0 p.a.
80%
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.
loading

Compare up to 4 providers

Aussie Home Loans Logo

Enter your details and get a free consultation with an expert broker from Aussie.

By submitting this form, you agree to the Finder Privacy and Cookies Policy and Terms of Use

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.

  • A comparison of home loans from multiple lenders.
  • Expert guidance through the entire application process.
  • Free suburb and property reports.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)

Images: Shutterstock

Related Posts

Home Loan Offers

Important Information*
Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get up $4,000 cashback for their first application (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

2 Responses

  1. Default Gravatar
    RajJune 23, 2017

    I have a home loan of $400,000 an offset of $400,000 with redraw amount of $200,000. Will it be beneficial for me to transfer $200,000 from the offset account to home loan account and use the balance $200,000 in the offset account for other investments?

    • Default Gravatar
      JonathanJune 24, 2017

      Hi Raj!

      Splitting your money from the offset account so that some of it goes to an investment is never discouraged, as long as you know it might give more money in the long-run. :)

      You can consult our financial advisers to help you decide on this matter based on your situation.

      Hope this helps.

      Cheers,
      Jonathan

Go to site