An Offset Account is similar to a Line of Credit or Home Equity Loan. Be aware, not all Offset Accounts are the same and it is important to research the intricate details of the loan conditions.

How a typical Offset Account works:

e.g. A Home Loan = $130,000

Your Offset bank account balance = $8,000

Therefore, you pay loan interest on only $122,000

Interest is calculated on the outstanding balance of the home loan. As income is added to the bank account, the interest calculated on the home loan is adjusted accordingly to reflect this. Some offset accounts only offset the interest earned and others are 100% offset. This is important to know as both are called offset accounts and this can be a trap if a particular care is not taken when choosing a lender or a loan.