What is an offset account?

An offset account links a transaction account to your variable rate home loan. It uses the money in that account to ‘offset’ your loan balance.

With a standard home loan, you pay interest on the total amount owing. But with an offset, interest is charged on the difference between your home loan balance minus the amount in your linked offset account.

This means you can pay less interest with an offset account. The more money you have in the offset account, the less interest you pay on your home loan.

How an offset account works

Say you’ve taken out a 30-year mortgage for $500,000. Now, suppose you pay an average interest rate of 5.0% p.a.

We’re going to assume you have, on average over the 30 years, $50,000 sitting in your linked account.

Over the life of your loan, interest will accrue on the balance of the loan less the $50,000 in your offset, and could save $142,000. Effectively, you end up paying off your loan sooner – your 30-year mortgage could end four years early.

Benefits of an offset account

Reduce your interest

With an offset account, every dollar in your linked transaction account saves you interest every day that it’s there.

Reach more financial goals

By leaving money in an offset account, you can continue to work towards other financial goals – such as a holiday, a new car or renovations.

Increase your cashflow

The flexibility of an offset account means you can access the money in that account at any time. While taking money out of the offset account will affect the interest you accrue, it’s comforting to know you can always access your cash.

Don’t have a home loan with us?

View our variable rate home loans with an offset account. Learn about the features and benefits of what our home loan can offer you and apply today.

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How to get the most out of your offset account

There are a few ways to help you maximise the benefits of an offset account.

Calculate your potential interest savings

Our loan repayment calculator lets you customise a loan using several variables – loan amount, term, interest rate, and more.

You can also enter how much (on average) you’ll have in your offset account. This will show you the savings you could make—and how much sooner you could pay off your loan.

Keep as much money in your offset as possible

Since every dollar (every day) saves you interest, it makes sense to keep as much of your extra savings in your offset account as you can, for as long as possible.

Have your salary paid into your offset

Whether it’s your salary or any other deposits, having it paid into your offset account could reduce the interest you accrue on your home loan.

Learn how to set up your income payments using the NAB app.

Take advantage of interest-free days on your NAB credit card

By using your NAB credit card for everyday purchases and then paying the full closing balance, or if you have a balance transfer the 'interest free days payment', by the due date each month, you keep your money in your offset account longer – offsetting interest on your home loan.

Tip: Set-up a direct debit from your offset account to ensure you always pay the full balance of your NAB credit card on time.

How to set up an offset account

  • Offset accounts can be linked to eligible variable rate home loans.
  • Fixed rate loans aren’t eligible for linking to an offset account until the end of the fixed rate period when your loan changes to a variable interest rate.
  • You’ll need an eligible transaction account such as the NAB Classic Banking account.
  • The person/s named on the offset account must be the same as the person/s named on the home loan.

Learn how to set up and manage your offset account

Learn how to open a bank account online

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Contact us for home loan related queries

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Terms and Conditions

Information is current as at 24 March 2023 and is subject to change.

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article. Please consider the relevant Terms and Conditions for the products referenced in this article available from nab.com.au or from NAB before making any decisions regarding our products.

Terms, conditions, fees, charges, eligibility criteria and lending criteria apply. Only eligible NAB Home Loans can benefit from an interest offset arrangement. For example, Fixed Rate Home Loans and Base Variable Rate Home Loans with NAB do not benefit from an interest offset arrangement. Contact us to find out more.

Target Market Determinations for these products are available at nab.com.au/TMD.

NAB’s home loan, deposit and credit card products are issued by National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.