For many homeowners, their mortgage is their largest cost each month. If that applies to you, then learning more about an ‘offset account’ could help you transform your loan into a tool to manage your money as you build your asset, instead of just being a cost to cover.

In fact an offset account can reduce the interest cost of your home loan and could help you pay your loan off sooner. Let’s take a closer look.

Offset accounts explained


Offset accounts generally works just like any transaction account - you can make withdrawals and deposits whenever you’d like. The difference is, offset accounts link to your home loan to reduce the amount of interest you’re charged. Interest is generally calculated on your home loan amount minus the offset account balance, instead of the entire home loan amount.

For example, let’s say you have a $500,000 home loan. If you deposited $20,000 into your offset account you would only be charged interest on $480,000.

If it’s used well your offset account could have many benefits, including:

  • Reducing the amount of interest you pay and saving you money.
  • Helping you pay your loan off sooner so you can spend and invest your money elsewhere.
  • Or alternatively, if you need the extra cash an offset account could help reduce the size of your monthly mortgage repayments.

Using an offset account


There are many ways that people access the benefits of an offset account – here are just three:

  • Some people have their salary paid into the account and use it for every day transactions and living costs.
  • Others will use it for long term savings for things like holidays and home renovations, topping it up whenever they can.
  • Some simply deposit an amount they’re not using into the account and leave it be, such as savings, bonuses from work or windfalls like inheritances.

However you use your account, it can be a good idea to keep the balance as high as possible to maximise your interest savings.

How much could you save with an offset account?


The amount of savings you make with an offset account will depend on your home loan interest rate and the amount you deposit into the account. The more you deposit, the more you’ll save.

  No offset account With Qudos Bank offset account
Home loan principal $500,000 $500,000
Offset account amount $0 $20,000
Interest charged on $500,000 $480,000
Interest rate 2.89% 2.89%
Interest savings first year (30 year loan term) $0 $578
Interest savings 30 year loan term $0 $9,930


In our example, an offset account with a balance of $20,000 could save you almost $600 in the first year and close to $10,000 over a standard 30 year loan term.

Qudos Bank home loans with offset accounts


To make it as easy as possible for you to save money and get a great deal on your home loan, we offer multiple offset accounts on several of our home loan products for both new and existing home loan customers. That includes the award winning Qudos Low Cost Home Loan and our Qantas Points Home Loan – click through, or give us a call on 1300 747 747, to find out more.


Qudos Mutual Limited trading as Qudos Bank ABN 53 087 650 557 AFSL/Australian Credit Licence 238 305. The information in this article is of a general nature and has been prepared without considering your objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances.

Loans are subject to approval. Normal lending criteria, terms and conditions and fees and charges apply. Mortgage insurance is required for home loans over 80% and is subject to approval.

You should read and consider the relevant terms and conditions and our Financial Services Guide available on our website, before deciding whether to obtain any of our financial products or services.

Published November 2020