Offset Account Home Loans Australia

An offset account is a transaction account linked to your home loan. The money you hold in the offset account reduces the loan balance that interest is calculated on. For example, if you owe $500,000 and hold $50,000 in offset, interest is only charged on $450,000. You can still access your offset funds at any time for everyday spending and savings.

A 100% offset account reduces your loan balance by the full amount held in the account. A partial offset only applies a portion of your balance against the loan, so the interest saving is smaller. Most major lenders now offer 100% offset on variable rate home loans. Partial offset accounts are less common and generally offer a reduced benefit.

Some lenders offer offset accounts on fixed rate home loans, but it is less common and may come with restrictions. Fixed rate offset accounts are sometimes capped at a partial offset or limited to a set balance. A common approach is to split your loan between a fixed portion and a variable portion, then attach the offset to the variable part.

The amount you save depends on your offset balance, loan size, interest rate and loan term. A consistent offset balance of $30,000 to $50,000 on a typical home loan can potentially save tens of thousands in interest over a 30-year term and shorten the loan by several years. The higher and more consistent your offset balance, the greater the savings.

An offset account keeps your savings separate from your loan and gives you instant access through a linked card or account. A redraw facility lets you withdraw extra repayments you have already made. The key difference is that offset funds are always yours and accessible instantly, while redraw funds may be subject to lender approval or delays. For investment properties, offset accounts can also have tax advantages over redraw. For a deeper comparison, see our offset vs redraw guide.

No. Not all home loan products include an offset account. Basic or no-frills home loans typically do not offer offset, while standard and professional package loans usually do. Some lenders charge a monthly or annual fee for the offset feature. It is important to compare whether the interest savings outweigh any additional fees before choosing a loan with offset.

Yes. Many lenders allow offset accounts on investment property loans. Using offset on an investment loan can be a strategic choice, particularly where the investor wants to preserve the tax-deductible loan balance while keeping savings accessible. You should seek independent tax advice before deciding where to direct your offset funds.

Generally, having an offset account does not reduce your borrowing power. However, choosing a loan product with offset may come with a slightly higher interest rate or package fee compared to a basic loan without offset. Lenders assess your borrowing capacity based on income, expenses, existing debts and the loan's interest rate, not the offset balance.