Finance Basics
What is an offset account?
An offset account reduces the balance your interest is calculated on. Here is the mechanics, plus what to watch for.
Educational information — not personalised financial advice.
The mechanics
An offset account is a transaction account linked to your home loan. The balance sitting in it is subtracted from your loan balance before interest is calculated.
If your loan balance is $500,000 and your offset holds $20,000, interest for that period is calculated on $480,000.
Full vs partial offset
A full offset applies 100% of the balance. A partial offset applies only a portion.
Offset vs redraw
Redraw sits inside the loan; offset sits alongside it in a separate account. They can behave differently for access, tax treatment and product rules.
What to watch
- Annual package or account fees
- Whether the offset applies to the whole loan or one split
- Availability on fixed-rate loans
Next step
See how the balance affects repayments and interest using the Mortgage Repayment Calculator.
Where this comes from: Written from publicly available Australian lending and government information. Figures change — confirm current details with the relevant lender or government source before relying on them.