Key takeaways:
Offsets are widely used: Australians held around $349.1 billion in mortgage offset accounts as at March 2026, according to ASIC.
An offset reduces the balance used to calculate interest: Your home loan balance itself stays the same while eligible funds remain in the offset account.
Its value depends on how you use it: Your average offset balance, home loan rate, offset percentage and fees can all affect the potential interest saving.
Offset and redraw work differently: Offset funds sit in a separate linked account, while redraw provides access to eligible extra repayments made towards your home loan.
Check your offset is correctly linked: Confirm it works as expected, especially after refinancing or switching home loan products.
A mortgage offset account is a transaction account linked to your home loan. Eligible funds held in the account reduce the loan balance used to calculate interest.
Offset accounts are widely used. As at March 2026, Australians held around $349.1 billion in mortgage offset accounts, up 28% over two years, according to the Australian Securities and Investments Commission.
Whether an offset account is worthwhile depends on factors such as how much you regularly keep in it, your interest rate, whether you have a full or partial offset, and any additional fees or differences in loan pricing.
What is an offset account?
Unlike an extra repayment, money in an offset account sits alongside your home loan in a separate transaction account rather than being paid into the loan. This means it can reduce the balance used to calculate interest without reducing the amount you owe.
For example, if your home loan balance is $500,000 and you have $50,000 in a 100% offset account, interest would generally be calculated on $450,000 while those funds remain in the account. Your home loan balance would still be $500,000.
Remember, home loan interest is generally calculated daily, although how and when it is charged varies by lender and loan product.
How does an offset account work?
An offset account works by applying its eligible balance against your home loan when interest is calculated. Here's how it generally works:
Add money to your offset account. Deposit your salary, savings or other funds and, depending on the product, use the account for everyday transactions.
Your eligible balance offsets the loan. The applicable offset amount reduces the home loan balance used to calculate interest.
Interest is calculated on the reduced amount. As your offset balance changes, the amount used to calculate interest changes.
Deposits and withdrawals change the offset. Adding money increases the amount available to offset the loan; withdrawing money reduces it.
Offset account example
Balance details | Amount |
|---|---|
Home loan balance | $200,000 |
Offset account balance | $30,000 |
Balance used to calculate interest | $170,000 |
Offset balance after $2,000 withdrawal | $28,000 |
New balance used to calculate interest | $172,000 |
Because home loan interest is generally calculated daily, keeping more money in your offset account longer can reduce the interest charged. Remember, the exact calculation and offset features depend on your lender and home loan product.
You might also be interested in: What home loan features can you add to your mortgage?
What are the different types of mortgage offset accounts?
There are two main types of mortgage offset accounts: full and partial offset accounts.
The difference is the proportion of your eligible account balance used to offset your home loan when interest is calculated.
Feature | 100% offset account | Partial offset account |
|---|---|---|
Amount offset | 100% of the eligible balance | A specified percentage of the eligible balance |
With a $20,000 balance | The full $20,000 offsets the loan | Only the applicable percentage offsets the loan |
Availability | Varies by lender and home loan | Varies by lender and home loan |
How does a 100% offset account work?
A 100% offset applies your full eligible account balance against your home loan when calculating interest. If you owe $400,000 and hold $20,000 in a 100% offset account, interest would generally be calculated on $380,000 while that balance remains in the account.
How does a partial offset account work?
A partial offset applies only a percentage of your eligible account balance. For example, with a 40% offset and a $20,000 balance, $8,000 would offset your home loan for interest calculations.
Offset percentages and how they are applied vary by lender and product, so check the loan terms when comparing your options.
How much could an offset account save?
The potential savings depends mainly on how much you keep in the account, how long it stays there and your home loan interest rate. As a simple guide, the yearly interest saving on a 100% offset is roughly your average offset balance multiplied by your interest rate.
For example, if you keep $30,000 in a 100% offset account and your home loan rate is 6.00% p.a., you could save around $1,800 in interest over a year.
Because interest is generally calculated daily, that works out to roughly $4.93 a day while the balance remains in the account.
Illustrative yearly interest savings at 6.00% p.a.
Average offset balance | Approximate interest saving per year |
|---|---|
$10,000 | $600 |
$30,000 | $1,800 |
$50,000 | $3,000 |
Note: These examples are illustrative only. They assume a 100% offset, a constant offset balance and interest rate for 12 months, and an offset balance that doesn't exceed the loan balance. They don't include fees or other costs. Your actual savings will depend on your lender, home loan product and how your balance changes over time.
Could an offset help you pay off your loan sooner?
Potentially. With a principal and interest home loan, money in an offset generally doesn't reduce your required repayments. Instead, paying less interest means more of each repayment goes toward reducing the principal.
If you maintain an offset balance and continue making your required repayments, you could repay your loan sooner and pay less interest over the life of the loan. The actual impact depends on your offset balance, interest rate, repayment structure and loan terms.
You might also be interested in: Extra repayments: How to pay off your home loan sooner
How much does an offset account cost?
Offset account costs vary by lender and home loan. Depending on the product, you may pay a monthly account fee, an annual package fee or no separate offset fee.
When comparing offset home loans, look beyond the offset fee. Consider the interest rate, comparison rate, fees and loan features together, as these can affect the overall cost of the loan.
What are the potential benefits and drawbacks of an offset account?
An offset account can reduce the home loan balance used to calculate interest while keeping your money accessible. However, costs and features vary by home loan, so it is important to weigh the potential benefits against the loan's overall cost.
Potential benefits | Considerations |
|---|---|
Potential interest savings: Money in an eligible offset account reduces the loan balance used to calculate interest. | Fees may apply: Account or package fees can add to the overall cost of the loan. |
Access to your money: Funds remain accessible through the linked transaction account, subject to the product terms. | Loan pricing can differ: Home loans with offset accounts may have different interest rates or fees from loans without them. |
Everyday money can work as an offset: Salary, savings and other funds can contribute to your offset balance while they remain in the account. | Your balance matters: The less you keep in the account, the smaller the potential interest saving. |
Available on some home loans: Offset accounts may be available with owner-occupier and investment loans. | Features vary: Offset percentages, account limits and transaction features depend on the lender and product. |
When comparing offset accounts, consider the interest rate, comparison rate, fees and offset features together rather than assessing the offset in isolation.
Offset account vs redraw facility: What's the difference?
An offset account and a redraw facility can both reduce the amount of interest charged, but they work differently. The key difference is where your money sits and how you access it.
Feature | Offset account | Redraw facility |
|---|---|---|
Where the money sits | In a separate transaction account linked to your home loan | In your home loan as extra repayments |
Effect on interest | Eligible funds reduce the balance used to calculate interest | Extra repayments reduce your outstanding loan balance |
Access to funds | Through the linked account, subject to product terms | Subject to the lender’s redraw rules and limits |
Fees | Account or package fees may apply | Redraw fees or restrictions may apply |
What to check | Offset percentage, fees and account conditions | Redraw limits, minimum amounts, fees and access conditions |
Neither feature necessarily provides unrestricted access to your money. Check your home loan terms for any fees, limits or access conditions.
For more detail on accessing extra repayments, read our guide to redraw facilities.
Tax implications can also differ, particularly for investment properties or homes that later become investment properties. Consider seeking independent tax advice if this applies to you.
Is an offset account worth it?
An offset account may be worthwhile if the interest you could save outweighs any additional home loan fees or costs. No set balance makes an offset worthwhile for everyone; it depends on your loan, how much you regularly keep in the account and the overall cost of the product.
When could an offset account be worthwhile?
An offset may be worth considering if you:
Regularly maintain a higher balance: The more money you keep in the account, and the longer it stays there, the greater the potential interest savings.
Want your money to remain accessible: An offset generally works like a transaction account, allowing you to access your money subject to the lender and product terms.
Could save more than the offset costs: Compare the potential interest saving against any additional fees and differences in interest rates or loan pricing.
When could an offset account provide less value?
An offset may provide less value if you usually keep a low balance, particularly if the home loan charges additional fees or has a higher interest rate than other options. Rather than assessing the offset feature alone, compare the home loan's overall cost and features.
A loan without an offset may suit your circumstances better depending on its rate, fees, features and how you manage your money.
Can I get an offset account with a fixed-rate home loan?
Some fixed-rate home loans offer an offset account, but availability and features vary by lender and loan product. Depending on the loan, you may have:
No offset: Some fixed-rate home loans do not offer an offset during the fixed-rate period.
A partial offset: Only a percentage of your eligible account balance offsets the loan.
A 100% offset: The full eligible account balance offsets the loan, subject to the lender's terms.
Before choosing a fixed-rate home loan, check whether an offset is available, what percentage applies and whether there are any fees or restrictions.
Learn more about how fixed-rate home loans work and what to consider before fixing your rate.
You might also be interested in: When is the right time to fix your home loan interest rate?
Is your offset account working as it should?
It is worth checking that your offset account is correctly linked to your home loan and delivering the interest benefit you expect. In 2026, ASIC reviewed eight banks representing more than 70% of Australia's $2.5 trillion home loan market.
It found weaknesses across all eight in how offset accounts were set up, monitored and managed, with some customers paying more interest than they should have.
Banks reported paying more than $55 million in compensation for offset account failures reported to ASIC between 1 September 2023 and 31 August 2025, with further compensation expected.
ASIC also found that refinancing or switching home loan products can disconnect an offset account from the loan, meaning it may need to be re-linked.
How to check your offset account is working
ASIC recommends checking that your offset account:
Is linked to the right home loan: Check your lender's app, online banking or statements rather than assuming the account is linked.
Is providing the expected interest benefit: Review the information available through your lender and ask questions if the interest benefit is unclear.
Remains linked after loan changes: If you refinance or switch products, check the offset still works. You may need to ask your lender to re-link it.
Is investigated if something looks wrong: Contact your lender promptly if the account appears incorrectly linked or you cannot confirm how it is operating.
ASIC's review examined the offset practices of eight banks and identified broader issues with how those banks managed offset accounts.
Sources:
Should I put savings in an offset account or make extra home loan repayments?
Both options can reduce the balance on which home loan interest is calculated, but the key difference is how you access your money later.
Money in an offset generally remains accessible through the linked transaction account, subject to the product terms. Extra repayments reduce your outstanding home loan balance, and accessing that money again may depend on whether your loan offers redraw and the applicable conditions.
With a 100% offset account, holding a given amount in the offset will generally reduce the balance used to calculate interest by the same amount as an equivalent extra repayment, as long as the funds remain there. A partial offset applies only a proportion of the account balance, so the effect on interest will be smaller.
Also check any limits on extra repayments, particularly for fixed-rate home loans, as lender and product conditions vary.
Which approach suits you depends on your need for access to the money, your loan's offset, redraw and extra repayment conditions and your circumstances. Tax implications can also differ, particularly for investment properties or homes that may later become investments, so consider seeking independent tax advice where relevant.
Want to see what additional repayments could mean for your loan? Use Aussie's Extra Repayments Calculator to estimate how extra repayments could affect your loan term and interest costs.
You might also be interested in: How to reduce your mortgage repayments
How can I compare home loans with offset accounts?
Not all offset home loans work the same way. Compare the rate, fees, offset features and other loan conditions together, rather than choosing a home loan based on its offset feature alone.
What to compare before choosing an offset home loan
Interest rate and comparison rate: Compare both when assessing the cost of the loan. The comparison rate is based on a prescribed loan amount and term and may not include every fee or cost.
Offset percentage: Check whether 100% or only part of your eligible balance offsets the loan.
Fees: Look for offset account fees, annual package fees and other applicable loan fees.
Expected offset balance: Consider how much you realistically expect to keep in the account, as this affects the potential interest reduction.
Account access: Check how you can access your money and whether the loan allows one or multiple offset accounts.
Fixed or variable rate: Confirm whether an offset is available with your preferred loan type and whether different conditions apply during a fixed-rate period.
Other loan features: Compare redraw, additional repayments and other relevant features alongside the offset.
Conditions and restrictions: Check any eligibility requirements, transaction limits and other terms that could affect how the offset works.
An Aussie Broker can help you compare eligible home loans from participating lenders, including their rates, fees, offset features and conditions, so you can understand how the options differ.
Is an offset account right for your home loan?
An offset account can reduce the balance used to calculate interest while eligible funds remain in the account, but its value depends on how much you keep in it, your home loan rate, fees, product features and your circumstances.
Rather than choosing a home loan simply because it offers an offset, compare the overall rate, fees, features and conditions. If you already have an offset, check that it remains correctly linked to your loan, particularly after refinancing or switching products.
An Aussie Broker can help you compare eligible home loans from participating lenders and understand how their offset features, rates and fees differ.
