How offset accounts work

How can an offset account help you pay off your home loan sooner?

An offset account is a simple tool that can help you save thousands of dollars over the life of your home loan.

So how does it work? A home loan offset account is a day-to-day savings account typically linked to a variable rate home loan. It allows the amount you have in savings to reduce the balance of your home loan for the purpose of calculating interest charges.

Let’s look at an example. If you have a $325,000 mortgage with an interest rate of 5.20% per annum and keep $2,500 in your offset account, you’ll only pay interest on $322,500 of the loan. The effects will add up over time—you’ll end up paying off your 30-year home loan five months early and saving $8,632 into the bargain.

The more you have in your offset account, the more you can save. For example, if you keep a balance of $25,000 in your offset account, that could help you pay off your 30-year mortgage three years and eight months earlier and save you $77,619 in interest.

For some people, an offset account is most effective when they make it the centre of their financial world. Making some simple changes to your day-to-day behaviour can maximise the benefits of an offset account and help you pay off your home loan sooner. Some of the options to consider when using an offset account are:

• using the account for all your day-to-day banking
• putting any extra savings into the offset account
• using your credit card for most of your purchases and then making sure you clear the card once a month to avoid interest. Your money will sit in the offset account for longer, helping to offset mortgage interest.

Please note, calculations are illustrative, do not represent actual rates or products, and are based on an interest rate of 5.20% per annum.

Which loans can I link to an Offset Deposit Account?

Most of our variable-rate loans can be linked to an Offset Deposit Account, including:

• Professional Pack Variable Rate Loan
• Basic Variable Rate Loan1
• Select Variable Rate Loan
• AMP First Variable Rate Loan (eligibility criteria apply)
• AMP Blue home loan (no longer available to new accounts)
• Introductory Classic Variable Rate Loan (no longer available to new accounts)
• Classic Variable Rate Loan (no longer available to new accounts)
• Affinity Variable Rate Loan (no longer available to new accounts)
• Affinity Basic Variable Rate Loan (no longer available to new accounts)
• AMP SuperEdge Variable Rate Loan (no longer available to new accounts)
  
• Introductory Professional Pack Variable Rate Loan (no longer available to new accounts)
• Low Doc Variable Rate Loan (no longer available to new accounts)

Offset Deposit Accounts are not available with:

• Construction and land loans
• AMP’s Essential Home Loan
• Lines of credit
• Fixed rate loans