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What is a mortgage offset account?

An offset account is a transactional savings account linked to your mortgage. The balance in this account is offset against your outstanding home loan balance, effectively reducing the interest payable on the mortgage. The offset account operates as a separate account, but its balance is used to offset the principal amount of your mortgage, reducing the interest calculated on that amount.

How Does an Offset Account Work?

Let's say you have a mortgage balance of $300,000 and $50,000 in your offset account. In this case, the interest charged on your home loan will be calculated on the net balance of $250,000 ($300,000 - $50,000). Essentially, the offset account reduces the amount on which interest is calculated, leading to potential interest savings and a shorter loan term.

This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.

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More FAQs.

What is an offset account?

When considering a mortgage, it's advisable to research different lenders and their product offerings to determine if they provide offset accounts as an option.

What are the costs of Refinancing? 

Several costs come with refinancing a home loan, although some of these costs are added to your new mortgage. You can get a rough estimate of the cost to refinance your mortgage by using a refinance calculator, or engaging a mortgage broker.

Settlement Day

On settlement day, it's important to consider tasks such as reviewing the final settlement statement, ensuring funds are available for the down payment and closing costs, and conducting a final inspection of the property before completing the purchase.

Reverse Home Loans

A reverse mortgage is a type of loan that allows homeowners who are typically 62 years or older to convert a portion of their home equity into cash.

Mortgage Refinancing

Mortgage refinancing is the process of replacing an existing mortgage with a new loan, typically to secure better terms, lower interest rates, or access equity in the property.

Lenders Mortgage Insurance

Lenders Mortgage Insurance (LMI) is a form of insurance that protects the lender in case a borrower defaults on their home loan, typically required when the borrower's deposit is less than 20% of the property's value.

Interest Only Loans

Interest only loans tend to be popular mainly with investors who wish to make minimum repayments whilst the property hopefully grows in value or for negative gearing purposes.