100% offset account

What is a 100% offset home loan?

100% offsetA 100% offset account for a home loan is a simple feature that enables you to pay off your loan sooner without even thinking about it. An offset account is a regular cheque account that has ATM, cheque book and internet access that is linked to your home loan when your loan is setup. Instead of earning interest on the money in your offset account, instead you save interest on your home loan!

This is beneficial because generally the interest rate on a savings account is far lower than the interest the bank is charging you on your home loan. With an offset account they will charge you interest on the balance of your home loan less the balance of your offset account.

Example offset calculation

If you had a home loan of $500,000 and you had an offset account with $100,000 in it then the bank would only charge you interest as if you owed them $400,000.

So how does this compare to putting your money in a savings account? If your home loan was at an interest rate of 5% p.a. and the savings accounts with the banks were at 3.5% p.a. then instead of earning $3,500 p.a. on your $100,000, by putting it in an offset account you would save $5,000 in interest.

Not just are you $1,500 ahead in this example, if you consider that the ATO would tax you on the $3,500 interest you earn from the savings account you actually end up even further ahead by choosing an offset account instead.

Which lenders offer a 100% offset account?

We’ve listed some of the loans offered by our lenders that have 100% offset accounts.

  • CBA- MAV Standard variable rate / Standard variable rate / 12 month discounted variable rate
  • Westpac- Premier advantage rocket investment loan / Premier advantage rocket repay home loan / Rocket repay home loan
  • St George- Advantage home loan package standard variable rate / Standard variable rate home loan / Advantage home loan package 1 year discount variable rate
  • Suncorp- Money manager standard variable / Standard variable rate loan
  • ANZ- Professional benefits standard variable residential land loan / Breakfree standard variable residential land loan / Breakfree standard variable package / Standard variable rate loan
  • NAB- Tailored home loan choice package/ Tailored home loan / National flexi plus
  • And many more…

How does a 100% offset account work?

A 100% offset account is a linked transaction account that usually has ATM and cheque access. By simply depositing your salary into this offset account, it can be used for all your daily expenses just like a normal cheque account, and the amount of interest that you pay for your loan will be decreased. The more money that you have in your offset account, then the lower your interest expense will be. You should consider the following to make sure you are making the most out of your 100% offset account:

  • Have your salary deposited into your offset account so that the amount of interest you pay will be less.
  • Ensure that you have sufficient funds in this account to make your loan repayments.
  • You can redraw from your home loan account to offset account if need be.
  • Use your offset account for transactions with your debit card including ATM, EFTPOS, internet banking, cheque book and BPAY.
  • Repayments are made to the home loan account from the 100% offset account.

Should I put my extra funds in the loan or offset account?

Technically there is no difference between putting your additional funds in the home loan account or in the 100% offset account. In practice we find it is better that you just keep your day to day funds in the offset account and put all your extra funds in the home loan account. This means that you will not see the funds on a day to day basis so will not be tempted to spend them!

Who can benefit from a 100% offset account?

A 100% offset account is available to anyone regardless on the amount of money they wish to borrow. There are no account keeping or hidden fees associated to this type of home loan so it will not necessarily cost you any extra. As a general rule we find that dual income families with high monthly expenses tend to benefit the most from an offset account as they need the most funds available for their day to day spending.

Can fixed rate loans have 100% offset?

The vast majority of lenders do not allow 100% offset accounts for fixed rate home loans. We have a select few lenders that can consider this type of loan, you can find out more about 100% offset fixed rate loans on our flexible fixed rate page.

Apply for a loan with a 100% offset account

If you would like to get expert advice on 100% offset accounts then please contact us or enquire online to talk with a mortgage broker who specialises in home loans with offset accounts.