If you're saving money in your offset you have 2 choices: keep it there or pay it into your loan.
By saving money in your offset account you keep the credit facility open while paying minimal to no interest.
By paying off your home loan instead you rid yourself of debt and any monthly repayments.
It might seem counter-intuitive to not pay off your home loan if you have the money to do so, but keeping your money in your offset account instead could be a better option.
Because here's the thing about owning property: Your home might be worth a lot, but it's hard to turn bricks and mortar into cash when you need it. The money in your offset account opens up far more financial possibilities than repaying the loan and having no cash left.
When you have enough money to pay off your home loan
Whether you have enough money to pay off your home loan or you're almost there, you've got a couple of options. You have 2 options now:
Pay off your mortgage. Use the money to pay off the loan completely. You're now out of debt. But you have $0 left in the offset account. If this is the bulk of your savings, you now have none.
Keep the loan open. Continue to add to your offset account, but don't close out the loan. You'll continue to make monthly repayments, but these will go to the loan principal and not towards interest. This means you have a lot of money you can easily access in the offset.
Expert insight
"The answer to this really depends on your purpose and the way you bank – I am an automated banker, I need everything to run on it's own so offset is perfect for me – but if I wanted to stash some money away the redraw is "out of sight, out of mind', and that works well for a lot of our clients. Investor clients without any personal debt will find the offset avoids the wrath of their accountant."
What if there's more money in your offset account than your loan?
It's possible to put more money in your offset account than the loan itself. But there's not much point. Doing this doesn't automatically close your loan account. You'd still need to discharge the loan.
But once you've saved more than the loan itself, you're not getting any benefit from offsetting interest. And your lender won't start giving you interest on top, like a normal savings account.
So you're better off keeping your offset balance just below your loan amount. Then you can use extra cash to start building up your savings separately, in something like a high interest savings account or a term deposit.
What to be aware of when considering repaying your home loan
Money in an offset account is yours, extra repayments are not
This is the key thing to understand. Money in an offset account is cash you can spend. But once it's gone to pay off the loan, it's gone. And once you pay the loan off and discharge the mortgage, the lender takes the money from your offset to cover your loan debt.
If you have plenty of savings in another bank account, it makes sense that you'd want to pay off your debt. But if you have no other savings, that offset account gives you more financial options than paying the loan off and having no money.
Even if you only have a small amount of cash, an offset account is a good move
Even if you only have $10,000 to put into an offset account, this works better than making extra repayments. You could still use that $10,000 in your offset account in an emergency.
It's true that lenders often let you take extra repayments back out of the loan if you need to access some cash. This is called a redraw facility. But there are often fees attached, or restrictions on how much you can access. Whereas money in an offset account is all yours.
"I have an older relative who chose not to keep her home loan account or offset open once the loan was paid off, because the $400 annual fee seemed unnecessary. But now she regrets it – it was essentially a $40k line of credit with a low interest rate of around 6%, which is a lot cheaper than other forms of credit. She's now in her 70s, and if she has to buy a car or has an unexpected expense, she'll have to jump through a lot of hoops to get any type of credit approved. Sometime, it's worthwhile paying the fee and keeping the account open."
Keeping money in your offset account vs paying off the mortgage
Keeping money in your offset
Pros
If your remaining 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.
If something goes wrong you can easily take money out of your offset account and access it, fast. If you have a separate account with money in it for emergencies, this is less of an issue.
If you decide to move or buy a second property you can use the funds from your offset account to cover the deposit.
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).
Cons
Withdrawing money from your offset account means you pay more interest.
Even though you're not paying any interest (if your offset amount is the same as your loan amount), you'll still need to make your mortgage repayment each month. You'll keep doing this until the full loan principal amount is repaid.
If your mortgage has ongoing fees you'll keep paying them as long as you keep the mortgage. This cost could be minimal, but it's something you need to consider.
Having a mortgage is just one more thing to worry about, and this strategy does require you to pay more attention to your finances.
Paying off your home loan
Pros
You're out of debt and you own your own home.
No mortgage means no fees. Easy.
If you just want to get out of debt then you might want to repay the mortgage and never hear the word "mortgage" again.
Cons
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.
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 cover your deposit. This means extra work and potentially extra costs.
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 having the flexibility of the offset account is less important to you.
Also, you might be the kind of person who just wants to close their mortgage and move on with their life.
Max keeps his home loan going and makes the most of his offset
In this hypothetical scenario, Max has $250,000 left to repay on his mortgage. He also has $250,000 saved in a 100% 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 still have access to the $250,000.
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 $240,000, meaning he has to pay interest on the $10,000 as he pays it back. This is still much cheaper than getting a car loan, not to mention much easier and less stressful.
Frequently Asked Questions
A mortgage offset account helps you save money by reducing the interest you pay over the life of your home loan, but it doesn't lower your regular repayments. Instead, the interest savings mean more of each repayment goes towards paying off the principal balance of your loan.
An offset account might not be the best fit if you want to maximise returns, as it doesn't earn interest like a savings account. There could also be higher fees or interest rates, and maintaining a balance requires discipline. It's important to weigh these factors against potential mortgage savings.
Yes, putting money in an offset account is generally worth it if you want to reduce the interest on your mortgage. Every dollar in the account offsets your loan balance, meaning you pay interest on a smaller amount. This can lead to significant savings over time, especially with larger balances.
Yes, you can. A 100% offset account is linked to your home loan, where you can store your savings to reduce interest. The balance in this account is subtracted from your loan amount when calculating interest, so you only pay interest on the remaining balance. You can use an offset mortgage calculator to see how much you could save by using an offset account.
Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University.
See full bio
Richard's expertise
Richard
has written
772
Finder guides across topics including:
Sarah is the author of How to Raise Rich Kids. With over 20 years of experience in property, finance and investment journalism, she is a trusted expert whose insights regularly appear across television, radio and print media, including Sunrise, Channel 7 News, Bloomberg and Yahoo! Finance. She has previously served as managing editor for Your Investment Property and Australian Broker. Her expert advice has been shared in the media over 4,000 times. Sarah holds a Bachelor’s degree in Communications and a Tier 1 Generic Knowledge certification, which complies with ASIC standards.
See full bio
Sarah's expertise
Sarah
has written
241
Finder guides across topics including:
Also consider that offset accounts are guaranteed against bank failure only up to $250,000 – so presumably any money in the offset account above that amount might be lost if your bank goes under. This would seem to be a point in favour of paying off the loan rather than leaving money sitting in an offset account.
Finder
RichardMarch 16, 2023Finder
This is true, although in most cases a lender going bankrupt will get bought by another institution. I don’t think there’s a case in modern Australia where a lender has gone bankrupt and borrowers with offset accounts have lost out.
But it’s worth keeping in mind all the same.
WendyFebruary 7, 2023
I have a fixed home loan due to expire in August. I owe $250k but have $120k in offset. I don’t understand why i have only paid 10k off the total amount owing (in the past 12 months). I pay the minimum monthly payment. Should i change to weekly or fortnightly repayments?
Finder
SarahMarch 2, 2023Finder
Hi Wendy,
We’re unable to provide personal advice, so it’s best to contact your bank directly about your situation.
However we can share that your mortgage repayment is comprised of two parts: one part is the principal (repaying the overall debt) and the other part is interest.
In 12 months, you’ve repaid $10k worth of principal and the rest of your repayments were going towards interest.
Generally, offset accounts are not available to offset the interest in a fixed rate mortgage, so it would be worth checking with your bank to double check you’re getting the benefit here. If you’re not (or even if you are!) you might be able to get a better return on your money by placing it in a high interest savings account.
Hope this helps!
NicoSeptember 8, 2022
My offset equals my loan, but as interest rates have increased so have my minimum monthly repayments. If the life of the loan hasn’t changed and I’m apparently no longer accruing interest on the loan amount then why would the minimum monthly repayments are increase?
When I asked my bank this question they could not (would not) give me an answer I could understand.
Finder
RebeccaSeptember 16, 2022Finder
Hi Nico,
We understand how confusing repayments can be but as a comparison site, we’re unable to comment on how your lender works out its repayments. It would still be best to discuss it with them. If their explanation is confusing, don’t hesitate to ask questions or clarification as they’d be happy to break it down for you. You could also talk to a mortgage broker who would be able to work through your situation to see if it’s still the best loan option for you.
All the best,
Rebecca
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?
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 a list of financial advisers to help you decide on this matter based on your situation.
Learn how to compare rates to find the best home loan and start saving money on your mortgage today.
Important information about this website
Finder is a comparison service. We do not compare every product or every provider in the market.
We make money through commercial arrangements with some of the providers on this site. Products marked 'Sponsored', 'Promoted', 'Featured' or 'Advertisement' appear as a result of a commercial arrangement.
Our editorial content, product reviews and any 'Top Pick' designations are prepared independently of these commercial arrangements.
The default order of products in our tables can be influenced by commercial arrangements. You can re-sort or filter using the controls above each table.
Some content on this site may be generated or supported by AI tools. You should verify details directly with the provider.
Finder is one of Australia's leading comparison websites. We are committed to our readers and stand by our editorial principles.
Our comparison service does not include every product or every provider in the market. Some product issuers offer their products under multiple brands or through associated companies. Where we can, we identify the underlying issuer so you can compare like with like, but you should always check with the provider directly to confirm which brand you are dealing with.
Finder is a comparison website and an intermediary. We are not a product issuer and we do not provide personal financial or credit advice. When you click a link to a product, or apply for a product through our site, you deal directly with the product issuer. We may receive a referral fee, commission or other payment from the issuer if you click through, apply or take out a product. We describe these arrangements in more detail under 'How we make money' below.
Product features, fees, terms and eligibility criteria are set by the product issuer and may change. We rely on information supplied by issuers when we present product details on our site. Before you apply for or take out any product, you should confirm the details directly with the issuer.
We earn revenue from Finder in four principal ways:
Referral fees and commissions. When you click a product link, complete an enquiry form or apply for a product through our site, we may receive a referral fee, commission or other payment from the product issuer. We may also receive payment based on the volume of leads or conversions we send to an issuer.
Sponsored placements. Products marked 'Sponsored', 'Promoted', 'Featured' or 'Advertisement' appear as a result of a commercial arrangement between Finder and the issuer. These labels always indicate a paid placement. We do not use them for editorial choices.
Display advertising. Banner advertising, newsletter advertising and similar display ads on our site are paid by advertisers.
Content sponsorship. Some articles, videos and social media posts are sponsored by an issuer and are clearly labelled as such.
Our editorial opinions, product reviews and any 'Top Pick' designations are prepared independently of these commercial arrangements. A 'Top Pick' is an editorial choice made by our writers and editors based on the criteria described on each comparison page. A 'Top Pick' is not a personal recommendation and does not mean the product is appropriate for your circumstances.
If you would like to know whether we have a commercial arrangement with a specific product issuer, please contact us.
When products are grouped in a table or list, the default order can be influenced by commercial arrangements we have with product issuers. In some categories, sponsored or featured products appear in the top positions of the table by default, and are always labelled as such.
Other factors that influence default order include price, fees and features, and (where relevant) our editorial view of the product.
You can re-sort every comparison table using the controls above the table. You can filter by product features that matter to you. The order you see after re-sorting or filtering is not influenced by commercial arrangements.
Some content on this site is generated or supported by artificial intelligence tools, including our AI-powered assistant FinderBot. AI-generated content may contain errors. Please verify important information directly with the product issuer before making a financial decision. For more information about FinderBot, see the FinderBot Terms of Use and FinderBot Privacy Collection Notice.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
In this hypothetical scenario, Max has $250,000 left to repay on his mortgage. He also has $250,000 saved in a 100% offset account.
Also consider that offset accounts are guaranteed against bank failure only up to $250,000 – so presumably any money in the offset account above that amount might be lost if your bank goes under. This would seem to be a point in favour of paying off the loan rather than leaving money sitting in an offset account.
This is true, although in most cases a lender going bankrupt will get bought by another institution. I don’t think there’s a case in modern Australia where a lender has gone bankrupt and borrowers with offset accounts have lost out.
But it’s worth keeping in mind all the same.
I have a fixed home loan due to expire in August. I owe $250k but have $120k in offset. I don’t understand why i have only paid 10k off the total amount owing (in the past 12 months). I pay the minimum monthly payment. Should i change to weekly or fortnightly repayments?
Hi Wendy,
We’re unable to provide personal advice, so it’s best to contact your bank directly about your situation.
However we can share that your mortgage repayment is comprised of two parts: one part is the principal (repaying the overall debt) and the other part is interest.
In 12 months, you’ve repaid $10k worth of principal and the rest of your repayments were going towards interest.
Generally, offset accounts are not available to offset the interest in a fixed rate mortgage, so it would be worth checking with your bank to double check you’re getting the benefit here. If you’re not (or even if you are!) you might be able to get a better return on your money by placing it in a high interest savings account.
Hope this helps!
My offset equals my loan, but as interest rates have increased so have my minimum monthly repayments. If the life of the loan hasn’t changed and I’m apparently no longer accruing interest on the loan amount then why would the minimum monthly repayments are increase?
When I asked my bank this question they could not (would not) give me an answer I could understand.
Hi Nico,
We understand how confusing repayments can be but as a comparison site, we’re unable to comment on how your lender works out its repayments. It would still be best to discuss it with them. If their explanation is confusing, don’t hesitate to ask questions or clarification as they’d be happy to break it down for you. You could also talk to a mortgage broker who would be able to work through your situation to see if it’s still the best loan option for you.
All the best,
Rebecca
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?
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 a list of financial advisers to help you decide on this matter based on your situation.
Hope this helps.
Cheers,
Jonathan