Mortgage offset account

Mortgage offset accounts are savings accounts that are structured so your savings balance in the account is offset against your home loan account. The advantages of mortgage offset accounts compared to normal savings accounts are:

  • The mortgage offset account balance reduces the interest payable on the home loan account.
  • As no interest is actually paid on the mortgage offset account, there is no tax payable to the ATO.
  • Overall interest savings as the interest income received on savings account balances is always several percent lower than the interest payable on home loans.
  • You pay your mortgage off faster. 
  • The mortgage offset account is a financial buffer that can be drawn down in emergencies.

Implementation process:

  1. Have your bank set up a mortgage offset account linked to your home loan.
  2. Have your salary or wages paid directly into your mortgage offset account.
  3. Use your credit card for everyday purchases and repay the full credit card balance at the end of each month (to avoid paying any interest).