What is a mortgage offset account?

What is an offset account?

With a mortgage offset account, the borrower takes out a home loan, opens a savings or transaction account, and links the account to the loan. The benefit is that the money in your account is “offset” daily against your loan balance, meaning that the loan pretends that you have paid the balance of the account off your loan.

This will reduce the mortgage interest charged accordingly. So you might have a $200,000 loan and $15,000 in your offset account. Because of your offset account, you will only be charged interest against $185,000.

Benefits of a Mortgage Offset Account

By having a decent amount of money in your offset account, you can effectively cut years and thousands of dollars from your home loan. They also work just as well if you have your salary deposited into a standard savings account every payday – you don’t need a huge amount of spare savings. In this way, you can shave countless dollars and years from the life of your home loan.

After rate cuts, job promotions or even lottery ticket victories – it’s easy to think hopping into the home-buying market will be a simple process where the savvy investor will win big. However, taking out a mortgage can be wrought with danger, especially if your financial situation changes or a rate change leaves you paying extra each month. Luckily, an offset account is one way to combat huge jumps in your monthly mortgage payments.

In general, offset accounts are great for all home-owners. Regardless of how much you deposit it will save you money and cut time off your mortgage.

Would you like more information regarding offset accounts? Find a great value offset account with our comparison tables below. Here are some of the current low rate home loan providers who feature offset accounts, sorted by comparison rate (lowest to highest). Please note that these products are based on a loan amount of $750,000 with a LVR of 80%, under a first home buyer profile in NSW.

Variable Home Loans Featuring Offset Accounts



3 Years Fixed Home Loans Featuring Offset Accounts


Compare Home Loans

How to choose an offset account

When choosing an offset account, look for:

  • No balance limit, so you can keep building your savings and cutting down on your home loan term.
  • An account where 100% of your total balance is offset against your loan.
  • This account should be identical to other standard savings or transaction accounts, with a bank card for electronic transfers and the ability to withdraw money from ATMs when you need.
  • An equal interest rate to your mortgage.

The last dot point is particularly important, as any interest earned in your account will also offset your mortgage interest – so you’ll enjoy further savings. This offset is also completely tax free.

Compare Home Loans

Important Notes: The Star Ratings in this table were awarded as per our most recent rating. View the Canstar Home Loan Star Rating Methodology. The Star Rating shown is only one factor to take into account when considering a product. Canstar is an information provider and in giving you product information Canstar is not making any suggestion or recommendation about a particular product. If you decide to apply for a home loan, you will deal directly with a financial institution not with Canstar. Rates and product information should be confirmed with the relevant financial institution. Home Loans in the table include only products that are available for somebody borrowing 80% of the total loan amount. For product information, read our detailed disclosure, important notes and additional information. Read the comparison rate warning. The results do not include all providers and may not compare all the features available to you. Canstar may earn a fee for referral of leads from the comparison table. See how we get paid.

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