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An offset account can be a good way to reduce the interest charged on your home loan, while also giving you access to your money whenever you need it. Here’s an explanation of how they work.

What is an offset account?

An offset account is a transaction account linked to your home loan. You can make deposits or withdraw from it as you would with a regular transaction account.

The big difference is that when you hold money in an offset account over a period of time, you can reduce the amount of interest charged on your home loan. The higher the balance and the longer the period, the less interest you’ll pay.  And this could help you pay off your loan sooner.

Generally speaking, the offset feature is only available on variable rate home loans (although some lenders offer an offset feature on selected fixed rate home loans).


What's an offset account?

An offset account is a transaction account linked to an eligible home or investment loan. 

The benefit of an offset account is that the money you have in this account can be used to “offset” the amount you owe on your home loan, and you'll only be charged interest on the difference. But you can still access the money in your offset account just like you do with a standard transaction account, using a debit card or at an ATM. 

This is how it works:

  • Your home loan balance is $350,000 dollars
  • And you have $25,000 dollars in your offset account
  • So, you'll only have to pay interest on $325,000 dollars.

Now using that example, let’s see how much you could save in the long run.

Let’s say you pay your home loan off over 30 years, the interest rate stays at 5% per annum, you make all your repayments as required and you have a constant daily balance of $25,000 dollars in your offset account. 

You could potentially save $75,000 dollars in interest and pay your home loan off over 3 years ahead of schedule.

So, how much you do save, depends on things like changes in interest rates and how much you have in your offset account.

So there you have it, linking your home loan to an offset account could help you pay off your loan sooner by reducing the amount of interest you pay so more of your repayments can go to reducing the principal amount of your loan. 

And because you can access the money, like a normal transaction account, it’s a great option. You can even have your salary deposited directly into your offset account to help you save as much as possible and make your money work harder for you!

How does it work?

Sometimes the best way of explaining things is to use an example.

  • Let’s say you take out a $400,000 home loan.
  • You then deposit $10,000 into your offset account.
  • You’ll now be charged interest on $390,000, instead of the full $400,000.
  • This will happen for as long as the $10,000 stays in your offset account.

How much could I save?

Keeping money in your account can potentially save you thousands of dollars and cut years off your home loan period.

Let’s look at the above example to see how much you could save.

  • You take out a home loan for $400,000.
  • The interest rate is 5%.
  • The initial loan period is 30 years.
  • You keep $10,000 in your offset account for the life of the loan.
  • You save over $30,000 in interest.
  • You reduce the time it takes to pay off your loan by more than a year.

How to use an offset account

Some people may have their pay deposited straight into their offset account and treat it as an everyday transaction account. Others may use their offset as a savings account for things like holidays or renovations – or for less exciting purposes like setting aside money for their tax bill.

Offset account v normal savings account

Your money generally works harder in an offset account compared to a regular savings account.  That’s because the interest rate you pay on a home loan is usually higher than the interest you earn in a savings account.

Another advantage is the interest you save by using an offset account won’t be considered income – which means it won’t be taxed. On the other hand, the interest you earn on a savings account will generally be considered income – and that means it may be taxed.

Offset accounts and savings accounts may have different fees and charges that apply. For more information on the fees that apply to ANZ products, see the ANZ Personal Banking Account Fees and Charges (PDF)

Is an offset account right for you?

Everyone’s situation is different. Before deciding on a mortgage with an offset account, you may wish to consider a few factors.  If you want regular access to your money, then an offset might work for you.

But remember that most lenders will charge for an offset account. You may pay a monthly fee. Or if your offset account is offered as part of a package, there’ll be an annual package fee.

It may be worth considering whether the amount of interest you’re likely to save will be more than the fee. Your lender or financial adviser can help you do the numbers in order to understand whether an offset account is right for you.

What’s the difference between offset and redraw?

Redraw facilities work in a similar way to offset accounts, but there are key differences. Generally speaking, redraw facilities are less flexible, but they can have advantages too.

We’ve put together an article explaining how redraw facilities work. Or if you’ve already read that, we suggest reading our article that looks more closely at the differences between offset accounts and redraw facilities.

To sum up 

  • An offset account is a transaction account linked to your home loan.
  • It could help reduce the amount of interest you pay on your loan and help you pay it off sooner.
  • The more money in your offset account, the less interest you’ll pay.

An ANZ One offset accountdisclaimercould help you save on interest

We can help you discover if an offset account is right for you.

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You might also be interested in


Redraw facilities: the what, why and how

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What's the difference between redraw and offset?

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Redraw facilities and offset accounts have many similarities. But there are some important differences too.



How extra repayments could help you pay off your loan sooner

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There are some simple strategies that could reduce your loan period and save you thousands of dollars in interest.


The information on this page does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you and read the relevant terms and conditionsProduct Disclosure Statement and the ANZ Financial Services Guide (PDF) before acquiring any product. 

Applications for credit subject to approval. Terms and conditions available on application. Fees and charges apply. Australian credit licence number 234527.

A $10 servicing fee applies per month per ANZ One offset account. Please refer to ANZ Personal Banking Account Fees and Charges (PDF) for fees and charges that apply.


A property price range estimate is an estimate only. It is based on certain available information and is not a valuation of a property or guarantee of its market value or future sale price. Price ranges and predictions may change daily and the actual sale price (if the property is sold) may be different.


Equity in your home is calculated as the difference between the value of your home and the amount you have left to pay on your home loan at the time the calculation is performed. Estimated equity ranges are estimates only and may not be available for all properties. They are based on certain available information and dependent on the current loan amount data that you input into your ANZ Property Profile Report request form, calculated against the price range estimate. Estimated equity ranges are not confirmation as to the equity you may have in a property or a guarantee of the equity available should a property be sold.


ANZ may provide pre-approval (also known as approval in principle or conditional approval) to eligible customers who apply for an ANZ home loan and complete an application form and satisfy any other applicable requirements. Pre-approval is an approval for a loan subject to conditions being met, including that security is satisfactory to ANZ. Australian Credit Licence Number 234527.


ANZ Mobile Lenders operate as an independently operated ANZ Mortgage Solutions franchise of Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Australian Credit Licence Number 234527.