What Is an Offset Account?
An offset account is one of the most powerful tools for saving money on your home loan. It’s a transaction account that’s linked directly to your mortgage, helping you reduce the amount of interest you pay and potentially shorten your loan term.
How an Offset Account Works
Instead of earning interest like a regular savings account, the balance in your offset account is used to “offset” or reduce the principal amount of your loan that’s charged interest.
For example, if you have a $500,000 home loan and $50,000 in your offset account, you’ll only be charged interest on $450,000. The higher your offset balance, the less interest you’ll pay.
Many lenders offer 100% offset accounts, meaning every dollar in your account directly reduces the interest calculated on your loan each day. You can still access your funds at any time — just like a normal transaction account.
The Benefits of an Offset Account
An offset account can offer several long-term financial advantages:
Save on interest: Every dollar in your offset reduces the balance your lender charges interest on.
Pay off your loan sooner: By reducing interest, more of your repayments go toward paying down the principal.
Maintain easy access to funds: You can withdraw or deposit money anytime — ideal for managing cash flow.
Boost financial flexibility: Great for people with variable income or investors managing multiple properties.
Offset Account vs Redraw Facility
Both features reduce the interest you pay, but they operate differently:
Offset account: Works like a separate transaction account linked to your home loan. You can use it for daily banking, salaries, and expenses.
Redraw facility: Lets you access extra repayments you’ve made on your home loan, but withdrawals can take longer or be restricted.
In short — an offset account gives you more flexibility, while a redraw suits borrowers who don’t need constant access to extra funds.
Who Should Consider an Offset Account?
An offset account can benefit:
Homeowners who keep savings or income in their account for most of the month.
Investors who want to reduce interest without paying down the loan principal (helping preserve tax deductibility).
Borrowers on variable home loans, as fixed-rate loans often don’t include offset features.
The Bottom Line
An offset account can help you save thousands in interest and cut years off your mortgage — all while keeping your funds accessible.
If you’re unsure whether an offset account suits your goals, speak with a Mortgage Broker who can review your current loan structure, explain the pros and cons, and help you find a lender and loan setup that maximises your savings.