Mortgage Offset FAQs

The following home loan products are eligible for a mortgage offset account:

• First Home Buyer Home Loan
• Advantage Home Loan
• Momentum Home Loan
• Essential Worker Home Loan
• Victorian Homebuyer Fund

A mortgage offset account is an everyday transaction account linked to your home loan. The credit balance of the account is offset against the balance of your home loan, effectively reducing the loan balance by the amount of your offset account balance. This saves you money over time and helps to reduce the time it takes to pay off your loan, too. To get the best value from an offset account you need to maintain a decent balance and have the ability to make further contributions to the account over time.

You can have as many mortgage offset accounts as you have home loans. However, only one offset account can be linked to each eligible loan.

If you have a home loan balance of $500,000 and have $30,000 in your offset account, you'll only pay interest on a home loan balance of $470,000. You won’t earn interest on the $30,000 in the offset account; instead, that $30,000 is offsetting the interest charged on your home loan.

Even though you don’t earn interest with an offset account, your money is still working hard for you. The point of an offset account is to reduce the amount of borrowed money on which you are paying interest and to shorten the lifetime of your loan.

Maximise your mortgage offset account by having your salary deposited into your account every pay day. It doesn’t matter if you have thousands of dollars or only a small amount saved - every dollar in your offset account reduces the interest you’ll pay on your home loan.

Both offset and redraw have the following similarities:

• They both allow you to save interest – we’ve already explained above how offset accounts can save you interest. Redraw facilities can also save you interest when you make additional repayments. These repayments reduce the amount you owe and therefore how much interest you’re charged until you redraw the funds.
• They both allow you to pay off your mortgage faster – having a redraw facility encourages you to make extra home loan repayments which will reduce the amount you owe. Even if you do redraw, you may not need to redraw the entire amount you have available. If you don’t you’ll pay off your home sooner.

Offset accounts reduce your home loan interest. This means that more of your regular repayments go towards reducing the amount you owe.

Differences between redraw and offset include:

• Offset accounts can be used as a daily transaction account – an account that’s separate from your mortgage
• Redraw facilities have less flexibility than offset accounts – there is a $100 minimum on redraw amounts, and the funds need to be transferred to a transaction account to be used.

It’s important to assess and consider which feature you are more likely to use and get the most value out of for your financial situation.