What is an offset account?
An offset account is one of the most powerful ways to save you hundreds of thousands of dollars over the lifetime of a mortgage.
A ‘100 per cent offset account’ can sound too good to be true.
But these accounts enable you to have every cent of your money working to reduce your mortgage rather than sitting idly in your transaction or savings account.
If you put as much of your spare change as you can into an offset account and keep it there for as many days as possible each month, your home loan repayments can be reduced as your savings are bringing down the interest incurred and in effect ‘offsetting’ the cost of the loan.
How does an offset account work?
Imagine if every dollar you had was linked through your everyday transaction account to offset your mortgage balance. You could be saving interest each day you hold that money in your offset account. Your mortgage will no longer be calculated on your full debt. It becomes calculated on your debt minus any offset funds you have accumulated.
Start with your wage
This will transform the way you save your money, even for those who find it hard to save. If you send your wage directly into your offset account, the money you earn is immediately reducing the interest you pay on your home loan – even if you end up spending some of that money over the cycle of a month.
Say you get paid on the 15th of the month, but your mortgage repayment cycle is on the 28th of each month. You could save the difference in interest on the amount in your account for all the days in between this period every month. In the long term this can add up to thousands.
Calculate offset account mortgage savings
The savings you can squeeze from an offset account will be different for everyone depending on their savings regime. However, if you had $15,000 sitting in an offset account for the life of a $350,000 loan, you could save more than $47,000 and pay off your loan more than 2 years sooner (calculated on 5 per cent interest over a 30 year loan).
Why use an offset account
An offset account can help when you are not in a position to pay lump-sum repayments into your loan. You may have savings you are gradually using for renovations, or your savings account might be your annual holiday fund.
Using an offset account is like getting your home loan interest rate as a percentage return on your savings. With interest calculated daily, the longer you can leave money untouched, the better off you’ll be.
What you should know
There are some home loans available that allow you to have multiple offset accounts which can be a great way to really maximised your interest savings but also keep your money separate for things such as savings for a holiday, or even your bills account.
Not all offset accounts offer 100% offset, for example some may offer a 40% offset benefit. This means if you have $10,000 in the account your may only be benefiting on $4,000 of your balance.
Some lenders charge fees and/or higher interest rates on home loans with offset accounts, your broker can help you to figure out if it is worth it for your particular circumstances and anticipated savings.
But these accounts enable you to have every cent of your money working to reduce your mortgage rather than sitting idly in your transaction or savings account.
If you put as much of your spare change as you can into an offset account and keep it there for as many days as possible each month, your home loan repayments can be reduced as your savings are bringing down the interest incurred and in effect ‘offsetting’ the cost of the loan.
How does an offset account work?
Imagine if every dollar you had was linked through your everyday transaction account to offset your mortgage balance. You could be saving interest each day you hold that money in your offset account. Your mortgage will no longer be calculated on your full debt. It becomes calculated on your debt minus any offset funds you have accumulated.
Start with your wage
This will transform the way you save your money, even for those who find it hard to save. If you send your wage directly into your offset account, the money you earn is immediately reducing the interest you pay on your home loan – even if you end up spending some of that money over the cycle of a month.
Say you get paid on the 15th of the month, but your mortgage repayment cycle is on the 28th of each month. You could save the difference in interest on the amount in your account for all the days in between this period every month. In the long term this can add up to thousands.
Calculate offset account mortgage savings
The savings you can squeeze from an offset account will be different for everyone depending on their savings regime. However, if you had $15,000 sitting in an offset account for the life of a $350,000 loan, you could save more than $47,000 and pay off your loan more than 2 years sooner (calculated on 5 per cent interest over a 30 year loan).
Why use an offset account
An offset account can help when you are not in a position to pay lump-sum repayments into your loan. You may have savings you are gradually using for renovations, or your savings account might be your annual holiday fund.
Using an offset account is like getting your home loan interest rate as a percentage return on your savings. With interest calculated daily, the longer you can leave money untouched, the better off you’ll be.
What you should know
There are some home loans available that allow you to have multiple offset accounts which can be a great way to really maximised your interest savings but also keep your money separate for things such as savings for a holiday, or even your bills account.
Not all offset accounts offer 100% offset, for example some may offer a 40% offset benefit. This means if you have $10,000 in the account your may only be benefiting on $4,000 of your balance.
Some lenders charge fees and/or higher interest rates on home loans with offset accounts, your broker can help you to figure out if it is worth it for your particular circumstances and anticipated savings.
Licensing statement: Rayne Finance ABN [70 605 100 838] is authorised under LMG Broker Services Pty Ltd Australian Credit Licence 517192. Disclaimer: (1) As with any financial scenario there are risks involved. This information provides an overview or summary only and it should not be considered a comprehensive analysis. You should, before acting in reliance upon this information, seek independent professional lending or taxation advice as appropriate and specific to your objectives, financial circumstances or needs. This publication is provided on the terms and understanding that: (2) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication. (3) LMG Broker Services Pty Ltd, Rayne Finance (Seed Lending Pty Ltd) and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to the maximum extent permitted by the law to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication.
Explore other FAQs and Facts
What the federal budget means for buying property
The 2025 federal budget introduces key measures affecting home buyers, including an expanded Help to Buy scheme, increased infrastructure investment, and incentives to grow the construction workforce. Foreign investors face new restrictions, and funding for prefabricated homes aims to accelerate supply. These changes could significantly reshape Australia’s property market.
Own your debt before it owns you
Here’s the hard truth: If you’re not in control of your debt, it’s controlling YOU.
Debt doesn’t just sit quietly in the background. It piles up, creeps into your financial freedom, and slowly starts calling the shots. It’s time to flip the script.
Find out how taking control of your debt can restore your financial freedom and bring peace of mind.
Rental growth slows as affordability is stretched
Rental growth slowed in 2024, despite the national median rent rising 4.8% for the year. Affordability pressures led renters to form larger households, easing demand. Meanwhile, increased investor activity added supply, lifting vacancy rates slightly to 1.9%. Still, with rents rising and vacancies low, many investors remain in a strong position.
Is the property downturn already over?
Australia’s property market rebounded swiftly in early 2025, reversing December’s brief price decline. Growing expectations of interest rate cuts have boosted confidence, while constrained housing supply continues to drive long-term price growth. With construction delays and undersupply persisting, the market’s dynamics are shifting toward sustained appreciation, rather than traditional boom-and-bust cycles.
Rates are on the move.
Are you getting the best deal on your mortgage?
The Reserve Bank of Australia’s recent cash rate cut presents an opportunity for homeowners to reassess their mortgage. With rates heading downward, it’s the perfect time to refinance, consolidate debt, or increase repayments to pay off your loan sooner. Take control of your financial future and explore your options now.
How to buy a property when you’re self-employed
Securing a home loan when you’re self-employed can be challenging, as lenders often view your income as less predictable and your financial position more complex. Strengthening your finances with stability and transparency can improve your chances. This article shares practical tips to help you secure better loan options, lower rates, and more lender interest.
The pros and cons of paying for LMI
(lenders mortgage insurance)
Lenders mortgage insurance (LMI) often gets a bad rap, but it can open doors for borrowers with smaller deposits. While LMI adds costs, it enables buyers to enter the property market sooner, potentially avoiding years of savings and rising property prices. Understanding LMI’s role is key to making informed decisions.
How to prepare for buying an investment property
Thinking about buying an investment property in 2025? The key to success starts with making yourself as creditworthy as possible. From increasing savings to understanding loan options and deposit requirements, there’s a lot to consider. Here’s how to set yourself up for a strong start.
2025 Money Moves:
Tips for Homeowners, Buyers, and Business Owners
The new year presents an ideal opportunity to reassess your finances. Whether you’re planning to buy property, managing a home loan, or running a business, there are key actions you can take to improve your financial situation. From enhancing your credit score to exploring refinancing options, small changes can make a big impact.
How the property market looks as we head into 2025
Australia’s property market is shifting, with a clear divide between strong and weak performers. While Brisbane, Perth, and Adelaide see robust growth, Sydney, Melbourne, Canberra, and Hobart face slower gains. As interest rate cuts loom in 2025, understanding regional trends will be essential for buyers and investors alike.