Is an offset sub-account worth it?

An offset sub-account is a great feature for borrowers and can help you save time and money off your mortgage. Find out if an offset sub-account is right for you.
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What is an offset sub-account?

An offset sub-account is linked to your home loan (whether that's a split home loan with offset, or interest only loan with offset) where you can put money such as your salary and savings into.

That money is then 'offset' against the balance of your home loan, so you only pay interest on the difference between the loan amount and the amount in your offset sub-account. This means you pay off the loan faster and with less interest. 

Putting money into our offset sub-account is like making extra mortgage repayments - except you can conveniently redraw the money using a Visa Debit card as if it were a daily transaction account. 

Here's an example: Let's say your loan balance (the amount you owe us) was $400,000 and you had $10,000 in your offset sub-account. Instead of calculating the interest on a home loan balance of $400,000, we would only calculate it on a balance of $390,000 ($400,000 - $10,000).


Your monthly repayment stays the same, but you're repaying the loan faster and paying substantially less interest.

In this hypothetical situation, interest is applied to $390,000 instead of the full $400,000 owed. The offset money acts like extra mortgage repayments, shortening the life of your loan. And a shorter loan means less interest paid. 

As the balance in the offset grows, the amount you save on interest grows too.

It's important to note that our offset sub-account is 100% offset. This means we take into account all of your money in your offset sub-account when we calculate your benefit. Not all lenders do this.

Offset calculator

Use our offset calculator to calculate the time and interest you can save on your mortgage when you put some money into your offset.

Is an offset sub-account worth it?

An offset can be a great way to save thousands of dollars of interest on your home loan. But it's still important to weigh up your individual circumstances to determine if an offset is right for you.

To accumulate significant savings, the amount of money held in the offset sub-account must be consistently at a reasonable level ($150 isn't going to cut it).

To maximise the amount that is offset, many people deposit all their salary into it. They can then spend the money using a linked Visa Debit card, just as they would with a transaction account.

Some other people use a credit card for all their expenses throughout the month and then make a lump sum payment from the offset sub-account once a month at the time 'due' from their credit card provider to balance the credit card balance back to $0 (avoiding interest charges and fees from the credit card). 

However, there is an interest rate premium involved with an offset. This is why it's important to ensure this doesn't end up costing you more than the amount of money you save.

To avoid that problem, you need to maintain a reasonable ongoing balance in it - otherwise it may be more worthwhile to go for a streamlined variable loan and get a slightly lower interest rate. 

You can still save on interest by making extra repayments into the loan, and you can withdraw the money at no cost if you need it in the future, though you won't have the convenience of a Visa Debit card.

For some, the benefits of a slightly lower home loan interest rate and lower loan term can outweigh the benefits of an offset. But for others who can maintain a strong balance in their offset sub-account, the benefits of saving thousands of dollars in interest is more valuable.

At the end of the day, it's important to weigh up your individual circumstances and financial situation to determine whether an offset is right for you.


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