An offset account is just like your everyday spending account, but this one’s linked to your home loan. Any money have you have in this account reduces the interest you pay. By getting a loan with an offset account, and moving your savings, salary and any other income into this account can save you thousands of dollars in interest over your loan period. Here’s an example:
For a loan of $500,000 over 30 years, at a 4.5% interest rate, if you kept $10,000 in your offset account, you would save $27,490.53 in interest.
Since interest is calculated daily, any money you have in that account, even for a few days, can add up to big savings over time. Some banks offer a partial offset account, which is different to this full offset account.