Offset Account Explained
Learn how offset accounts work in Australia, when they beat extra repayments, and how to estimate interest and time saved.
Offset Account Explained: How Much Can You Save on a Home Loan?
An offset account reduces the loan balance your lender charges interest on. If you keep cash savings, an offset can be one of the fastest ways to cut interest without “locking money away”.
Use the calculator here to estimate the impact:
- Tool: Home Loan Repayment Calculator
- Enter your offset under "Offset balance (average)"
How an offset account works (simple example)
- Loan balance: $600,000
- Offset savings: $40,000
- Interest charged on: $560,000 (estimate)
You still owe $600,000 — but you pay interest like it’s $560,000.
Offset vs extra repayments: which is better?
Offset wins when:
- You want access to cash (emergency fund)
- Your income/expenses fluctuate
- You plan to refinance soon
Extra repayments win when:
- Your lender charges high package fees for offset
- You’re highly disciplined and won’t need the cash
Best practice: If you’re unsure, model both scenarios using the “Compare scenarios” feature in your calculator page.
Tips to maximise offset savings
- Salary into offset
- Pay bills from offset
- Keep buffer savings in offset
- Avoid keeping large idle cash outside offset
Common questions
Does offset reduce my repayment?
Often, minimum repayments stay similar — but more of each repayment goes to principal, meaning you can finish earlier (estimate).
Is offset the same as redraw?
No. Redraw is extra repayments you can withdraw later (subject to lender rules). Offset is your cash sitting alongside the loan.
Next steps
Next: Extra repayments guide → Extra repayments guide