What is an offset account?

An offset account is a transaction account that is linked to your home loan. The account’s balance (or a proportion of that balance) is ‘offset’ daily against your home loan balance. As a result, you’re only charged interest on the difference between the total loan balance and the amount offset.

This means the lender charges you less in interest because they are not charging you interest on the full, actual remaining balance of your loan.

Offset accounts are more commonly linked to a variable rate home loan, but they can also be linked to a fixed rate home loan.

Offset accounts work by using up to 100% of the balance of a linked transaction account to ‘offset’ or effectively reduce the portion of your home loan that is accruing interest. For example, if you had a loan with a balance of $350,000, with $50,000 in a linked 100% offset account, you would only pay interest on $300,000 of your balance.