Offset mortgage

An offset mortgage lets you use credit balances in linked accounts to reduce the loan balance on which interest is charged, without those funds being applied to the loan.

How it works

$400,000 loan, $40,000 sitting in a linked offset account. Interest is charged on $360,000. The $40,000 remains yours to withdraw at any time.

Some lenders allow multiple accounts, and accounts held by family members, to be linked.

Why investors use it

It combines the interest saving of paying down debt with the accessibility of savings. Useful for holding deposits, renovation funds, or a buffer.

Common misunderstanding

Offset is generally only available on floating rates, which carry a higher rate than fixed. Run the numbers — the offset saving needs to exceed the fixed/floating rate gap to be worthwhile.

Interest allocation for tax purposes needs care where an offset facility mixes personal and investment funds. Same issue as revolving credit — keep them separate.

Offset and revolving credit are different products that solve similar problems. Offset keeps the loan and the savings distinct; revolving credit merges them.

Related terms

Last reviewed: 1 August 2026 · General information only, not financial advice.

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