What is an offset account and how do they work?

An offset account is an everyday bank account that sits next to your home loan and reduces the amount of interest you pay on your home loan, by the amount sitting in your offset account.

For example if your home loan balance was $500,000 and you had $10,000 in your offset account, you would only pay interest on $490,000. If you removed $5,000 from your offset account, and your balance was now $5,000, you would pay interest on $495,000.

Because interest is calculated daily, everyday you can leave funds in your offset account, will reduce the amount of interest you pay and assist you with paying off your home loan faster.