Offset Account – The good, the bad & the interest saved

What is an offset account?

An offset account is a popular feature available on eligible everyday transaction accounts, and eligible home loans.  The offset account and the home loan are ‘linked’ for the purpose of how debit interest is calculated on the Home Loan. You can link offset accounts to both owner-occupied home loans or an investment loans.

How does an offset account work?

The amount of deposit funds you have in your offset account helps reduce the debit interest you pay on your mortgage by simply ‘offsetting’ the balance of funds held in your offset account. This means that instead of paying interest on the full outstanding loan balance, you will only pay interest on the balance of the outstanding loan, less the balance of funds held in your offset account.

For example, let’s say you’ve taken out a mortgage for $300,000 at an interest rate of 3.90% over a 30 year loan term. You have $20,000 savings sitting in your offset account.

This means you can save a total of $40,085.37 in debit interest over the loan term.  Your deposit funds are available to you whenever you need,  however, whilst you hold deposit funds in your offset account, you will save interest on your home loan and you could potentially cut considerable time off your mortgage and repay your loan much sooner then you expect.

Use our home loan offset calculator below to calculate how much you could be saving on your current mortgage.

If you are having trouble loading the home loan offset calcualtor, please make sure your browser is not blocking the javascript by allowing pop-up notifications and pressing ‘show all content’.

Pros and cons of having an offset account


  • Potentially pay off your mortgage faster than anticipated
  • Pay less in interest over the loan term
  • Easy to manage
  • Easy to access the excess funds, while at the same time minimising your interest
  • Freeing up cash


  • Might involve additional fees for linking an offset account to a home loan
  • Could pay a higher interest rate to accomodate the offset account

For more information on offset accounts please speak to your Pacific Finance Australia Broker on 08 9321 2120 or send us an email via