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An offset account is like a savings account attached to your home loan. The money you have in the offset account is used to 'offset' how much you owe on your loan. Because of this, you'll pay less interest.
Explore the benefits and see how much you could save with this mortgage-linked account.
An offset account is a separate account that's linked to your home loan.
You can make deposits into this account and grow your balance over time to 'offset' your home loan. You'll only be charged interest on the difference between the amount you owe on your home loan minus the balance in your linked offset account instead of the full home loan balance.
What's more, you can withdraw cash, transfer money, deposit your salary and pay bills, just like you would with any other transaction or savings account.
An offset account reduces your interest payments. It also:
Both your home loan rates and the amount you deposit will determine how much you save over the span of your loan.
| Variables for 30-year loan | No offset account | Partially offset |
|---|---|---|
| Loan amount (principal) | $600,000
|
$600,000
|
| Interest rate | 4% | 4% |
| Offset account balance | $0 | $50,000 |
| Total amount paid over 30 years | $1,031,877 | $929,923 |
| Savings over 30 years | $0 | $101,954 |
| Variables for 30-year loan | Loan amount (principal) | Loan amount (principal) |
|---|---|---|
| No offset account |
$600,000
|
$600,000
|
| Partially offset |
$600,000
|
$600,000
|
| Variables for 30-year loan | Interest rate | Interest rate |
| No offset account | 4% | 4% |
| Partially offset | 4% | 4% |
| Variables for 30-year loan | Offset account balance | Offset account balance |
| No offset account | $0 | $0 |
| Partially offset | $50,000 | $50,000 |
| Variables for 30-year loan | Total amount paid over 30 years | Total amount paid over 30 years |
| No offset account | $1,031,877 | $1,031,877 |
| Partially offset | $929,923 | $929,923 |
| Variables for 30-year loan | Savings over 30 years | Savings over 30 years |
| No offset account | $0 | $0 |
| Partially offset | $101,954 | $101,954 |
In this comparison, if you were to partially offset $50,000 on a $600,000 home loan, at an interest rate of 4%, you could expect to save over $100,000. You could also reduce your home loan by almost 3 years.
This is an example only for the purposes of demonstration. In reality, many people will gradually add to their offset account over time, making a bigger and bigger saving as time goes on.
You'll pay less interest over the life of your home loan but your repayments won't go down. Instead, because you are paying less interest, more of your repayments will go towards the principal, helping you pay off the loan faster.
Offset accounts are a popular, money-saving feature of many home loans. Here are 3 ways you can maximise your savings:
Both offset and redraw can save you money.
However, the biggest difference between these loan features is how easily you'll be able to access your money. An offset account is a separate transaction account linked to your home loan that you can access online or with a debit card. Redraw is a feature of your home loan that allows you to withdraw any extra repayments you've made on your home loan.
The amount of extra repayments or withdrawals may vary between lenders.
With the HSBC Home Value Loan, you can make unlimited extra repayments and withdraw money for free, whenever you need it. There are also no monthly or annual fees.
You can enjoy the flexibility and convenience of an offset account with our Standard Variable Rate Home Loan.
If you already have a home loan with us, you can contact your Home Loan Manager or call us on 1300 308 008. Otherwise, you can fill in our online enquiry form to get a call back.
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This article is intended to provide general information of an educational nature only. This information should not be relied upon as financial product advice as it does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of the information to your own circumstances and seek independent legal and financial advice prior to making any investment choice. There are risks associated with any investment and this document is not intended to list all of them in respect to any particular investment opportunity. Prices, levels and indications contained in this document are illustrative only and may not represent future performance. HSBC does not warrant or represent the performance of any investment opportunity.
Disclaimer: Credit provided by HSBC Bank Australia ABN 48 006 434 162. AFSL/Australia Credit Licence 232595. Home Loan Terms, Personal Banking Booklet, Fees and Charges and lending criteria apply. This article does not take into account your personal or financial situation. Please consider a relevant Product Disclosure Statement, available at hsbc.com.au or by calling 1300 308 008 before making a decision about this product.
