Everything you need to know about mortgage offset accounts in Australia.
How does a mortgage offset account work?
An offset account is a transaction account linked to your home loan. The balance in your offset account is subtracted from your outstanding loan balance before interest is calculated. For example, if you owe $600,000 and have $50,000 in your offset account, you only pay interest on $550,000 — saving you money every single repayment.
How much can I save with an offset account?
The savings depend on your loan balance, interest rate, and how much you keep in your offset account. On a typical Australian mortgage of $600,000 at 6.5% p.a., maintaining $50,000 in offset can save over $100,000 in interest and cut several years off your loan term. Use the calculator above to see your personalised estimate.
Is fortnightly repayment better than monthly?
Yes, for most borrowers. Paying fortnightly means you make 26 half-payments per year — equivalent to 13 monthly payments instead of 12. That extra month of repayments each year reduces your principal faster, saving you interest over the life of the loan. On a 30-year mortgage, switching to fortnightly repayments alone can cut 2–4 years off your loan term.
Should I put my savings in an offset account or pay extra off my mortgage?
An offset account gives you the best of both worlds — your money reduces your interest the same way as making extra repayments, but you can still access the funds if you need them. Extra repayments on most Australian mortgages are harder to redraw. For an emergency fund or savings you may need, offset is almost always the better choice.
Does an offset account reduce the loan term or the repayment amount?
With most Australian lenders, your minimum repayment amount stays the same when you have an offset account. Instead, more of each repayment goes toward principal rather than interest — which means your loan is paid off sooner. The calculator above shows you exactly how many years you can save based on your offset balance and monthly contributions.
What is a good offset account balance?
There is no minimum — even a small offset balance saves you money from day one. As a guide, Australian financial planners often recommend keeping at least 3–6 months of living expenses in your offset as an emergency fund while simultaneously reducing your mortgage interest. The more you keep in offset, the greater your interest savings.
Do all Australian home loans offer an offset account?
Most variable rate home loans from Australian banks and lenders include a 100% offset account, but not all fixed rate loans do. Some lenders charge a higher rate or annual fee for offset facilities. Always check with your lender whether your loan includes a full 100% offset account, as partial offset accounts are less common and less effective.
How is the monthly interest saving calculated?
The monthly interest saving shown in this calculator is calculated as your current offset balance multiplied by your monthly interest rate (annual rate ÷ 12). This represents the exact dollar amount you are saving on your very next repayment by having that money in offset rather than a separate savings account.