Save more with the "Offset effect"

A simple way to save

The Offset Effect is a great way to spend less money on interest and pay off your home loan quicker. How does it work? Let’s say you have a home loan balance of $400,000 and $20,000 sitting in your offset redraw facility. With a 100% offset, interest is only calculated on a balance of $380,000 ($400,000 minus $20,000). Every dollar in offset saves you money every day.

A better use of your money

Using your offset to reduce the amount of interest you pay on your home loan is like earning high interest that’s tax free. In most cases, your home loan interest rate is going to be higher than your savings account interest rate, so you’re in front when you use your offset. And since the offset doesn't earn interest (it reduces the loan interest that accrues), there’s no requirement to pay tax, like you would on a savings account. Your money is working 24/7 for you, not the taxman.

How to create "the offset effect" to maximise your savings

  • Every dollar in offset saves you money every day. So to boost the savings with the Offset Effect, have your salary paid directly into your offset. Setting this up is easy with the benefit that your salary is immediately put to work for you to reduce the interest on your home loan.
  • Paying your bills on the due date means your money is working for you right up until it leaves your offset. It's reducing the amount of interest on your home loan, not gaining interest in a big corporation’s investment account.
  • If you're saving for a holiday, new car or even school fees, you can use those savings to help pay off your home loan faster. Deposit them in your offset until you need the money so you will pay less interest. Those extra thousands can make a big difference.
  • Every dollar counts with the Offset Effect. So go nuts! Put that spare change that sits in a jar or lies hidden in the couch to good use. And ditching coffee for a while can really add up too. One $4 coffee each day is $20 a week or $80 a month – almost $1,000 a year off your loan. To get a better idea of how much you can save on your offset home loan, use our offset calculator.

Recommended reading

Is an offset account worth it?

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


How to use offset mortgage calculator

Calculate how much time and interest you could save on your home loan with a redraw offset facility using our handy mortgage offset calculator.


How does a home loan offset facility work?

This feature allows to you offset any cash funds you hold, including your salary, against your loan balance and save on interest.