Finance Basics

What is an offset account?

An offset account reduces the balance your interest is calculated on. Here is the mechanics, plus what to watch for.

Updated 15 September 20265 min readBy Capital Route Editorial Team

Educational information — not personalised financial advice.

The mechanics

An offset account is a transaction account linked to your home loan. The balance sitting in it is subtracted from your loan balance before interest is calculated.

If your loan balance is $500,000 and your offset holds $20,000, interest for that period is calculated on $480,000.

Full vs partial offset

A full offset applies 100% of the balance. A partial offset applies only a portion.

Offset vs redraw

Redraw sits inside the loan; offset sits alongside it in a separate account. They can behave differently for access, tax treatment and product rules.

What to watch

  • Annual package or account fees
  • Whether the offset applies to the whole loan or one split
  • Availability on fixed-rate loans

Next step

See how the balance affects repayments and interest using the Mortgage Repayment Calculator.

Where this comes from: Written from publicly available Australian lending and government information. Figures change — confirm current details with the relevant lender or government source before relying on them.

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