What is an offset account?

This is an account linked to your home loan. The money in the account is ‘offset’ daily against your home loan balance and as a result, the interest you pay is the difference between the home loan balance and the offset.

Only some home loans offer offsets and need to check they are 100% offset and apply for the duration of the loan (vs. only a specified time). Some banks also offer multiple offsets accounts against the one home loan which can help with saving towards multiple goals.

For example, if you have a $500k loan with $100k in a 100% offset account and have paid off $150k, you only pay interest on the balance less the offset i.e. $250k.