An offset account is a transaction account linked to your home loan. When you maintain a positive balance, this amount is offset daily against your loan balance—reducing the interest charged and helping you pay off your loan faster.
Example: If you have a $400,000 loan and $100,000 in your offset account, you’ll only be charged interest on $300,000. Over time, this can shave years off your home loan and save you thousands in interest.
Most offset accounts require a minimum balance (often around $1,000) to activate the offset function. However, maintaining a balance of at least $3,000 or more is where you’ll begin to see real, long-term benefits.
1. 100% Offset Account
The full balance is offset against your home loan, reducing the interest payable. While your offset account doesn’t earn interest, it helps you save significantly more by reducing home loan interest.
2. Partial Offset Account
This functions more like a savings account. The interest earned is used to reduce your loan principal. While still helpful, a 100% offset account is generally the more effective option.
Understanding the features and benefits of offset accounts can be complex—especially if you’re self-employed and using alternative income verification like bank statements. At Self Employed Finance, we help you navigate the options, ensuring your loan structure supports your long-term goals.
Speak with us today to find out how an offset account could work for you.