What is an offset account?

An offset account can help you better manage the interest payable on your home loan.

It’s always good to look at ways you might be able to pay off your home loan faster, including increasing the amount and frequency of your repayments.

Another way to potentially bring down the balance of your loan and pay it off faster is to use an offset account.

What is an offset account?

An offset account is an everyday bank account that’s linked to your home loan. You can deposit your salary and savings into the account and the balance is then offset against the amount owing on your home loan.

Say you have a home loan of $250,000 and $30,000 in your offset account, you’ll only be charged interest on a loan balance of $220,000 ($250,000 - $30,000).

As the offset account acts like an everyday account, your $30,000 is still accessible whenever you need it, even while it’s working to reduce your overall interest payments.

The potential advantages of an offset account depend on how much money you have sitting in it and the type of offset you have. 

Things to consider

As offset accounts can differ, there are some key questions to ask when looking at opening one.

  • Is your loan eligible for an offset account? You can find this out by contacting your financial institution or, for CommBank home loans, by comparing them.
  • Is 100% of the balance offset against the home loan?
  • Is there a limit to the balance of the account that will be offset?
  • Are there any account-keeping fees and will they negate any of the financial benefits?
  • Are there any limits to the amount or types of transactions you can make?
  • Will the reduced interest on your home loan be greater than the interest you would earn if the savings in the offset account were in a savings account?
  • What are the key differences between an offset and a redraw facility
  • In the event of an emergency, how easily can you access the money you put into your offset compared to your redraw facility?

Book a time with a Home Lending Specialist to discuss offset accounts

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Things you should know

This article provides general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as personal financial product advice. The views expressed by contributors are their own and don’t necessarily reflect the views of CBA. As the information has been provided without considering your objectives, financial situation or needs, you should, before acting on this information, consider what is appropriate for your circumstances, and where appropriate, consider the relevant Target Market Determination, Product Disclosure Statement and Terms and Conditions available on our website. You should also consider whether seeking independent professional legal, tax and financial advice is necessary. Every effort has been taken to ensure the information was correct as at the time of printing but it may be subject to change. No part of the editorial contents may be reproduced or copied in any form without the prior permission and acknowledgement of CBA.