Generally, you can only have one offset account linked to your home loan. However, some lenders offer home loans with multiple offset accounts linked to one loan.
If used wisely, multiple offset accounts are a great way to reduce the cost of your loan, the interest you’ll pay overall and the time to clear your debt. Linking your home loan to multiple offset accounts is especially beneficial if you prefer compartmentalising expenses and are saving up for some specific future goal.
What are Multiple Offset Accounts?
An offset account refers to an account linked to your home loan and typically operates like a transaction or savings account. It offsets the balance in that bank account against your home loan balance, which means you are only paying interest on the difference. The more money you save in your offset account, the more home loan interest you save.
In some cases, lenders offer multi-offset accounts against a single loan. Your funds across multiple accounts are totalled, and the combined value of your funds is offset against your loan. These are known as multiple offset accounts.
How do they work?
In general, an offset account is straightforward and easily manageable. Your employers deposit your salary into the account linked to your offset account, and quite simply, you begin saving money on interest repayments.
To explain, say you have $15,000 in your offset transaction account and you owe $250,000 on your home loan. You only pay interest on your mortgage amount minus the sum in your offset accounts. In other words, you will be charged interest on a $235,000 loan instead of the $250,000 home loan.
If you are only paying interest on your home loan, the benefits will include reduced repayments towards your loan. In addition, you will see a reduced loan term if you are paying both principal and interest components.
An offset account is more prevalent among variable interest rate loans, but some lenders offer the home buyer offset accounts with a fixed rate home loan. Lending criteria vary between lenders or financial institutions.
In most cases, you can link your loan to one offset account only. Although your options are much lesser, some lenders covered by an Australian credit licence offer multiple offset accounts linked to one loan.
Benefits and Drawbacks of Multiple Offset Accounts
In opting for multiple accounts with the same bank, you benefit from being able to track your financial situation and save on interest conveniently. This means you can manage your finances better and make the most of your home loan with your money.
Multiple offsets also make saving money easier. For example, you can set up a separate offset account for different purposes - one transaction account linked for daily personal expenses, one for your annual vacations, and similar multiple savings accounts based on your personal objectives.
Moreover, home loans linked to multiple mortgage offset accounts are advantageous if you have more than one transaction account, like a property investment that earns you rent.
On the flipside, monthly offset fees may apply for each of the offsets you set up against your home loan, which means your annual fee component will be higher.
Offset accounts, in general, are more costly than most types of loans.
How Do You Use Multiple Offset Accounts?
You can set up multiple offset accounts in a way that categorises your different types of expenses or specific financial goals.
The typical combination could include:
- An everyday account for expenses such as groceries, health expenses and transport costs.
- An account for direct debit, credit card and utility bills payments.
- An account for children’s education expenses,
- An account for family vacations or an emergency fund in case of any unforeseen difficulties.
Ear-marking budgets make it easier to manage and track expenses quickly, and many find this straightforward approach ideal for financial management.
Some home buyers who have savings in their bank prefer to link their home loan with an offset account as the savings in the account are counted against the loan’s value, effectively reducing interest payments.
If home buyers choose to link their home loan to the multi-offset accounts, then the combined value of their savings across these multiple accounts is set against their loan.
Overcoming Limitations in Setting Multi-Offset Accounts
Most lenders allow you to offset the amount of one account. So if you are in the habit of bucketing your money for better resource management, you will have to select one account, preferably the typically the larger one, as your offset.
Many home buyers work around this constraint by setting up multiple variable rate home loans and linking them to multiple offset accounts.
Which Banks Offer Multiple offset Accounts?
NAB Offset Accounts
You can use the offset facility to link your NAB Classic Banking transaction account to your variable rate home loan. The money in your transaction account can ‘offset’ your loan balance, so you pay less interest on your home loan.
If you have a fixed rate home loan, you can consider getting an offset account at the end of your fixed-rate period when your loan shifts onto a variable interest rate.
ING Offset Accounts
ING’s Orange Advantage offers home loan borrowers a 100 per cent offset facility. You can reduce the interest payable on your home loan by using the offset feature and depositing into your linked Orange Everyday bank account.
Westpac Offset Accounts
Westpac offers offset on the Rocket Repay Home Loan or a Rocket Investment Loan. The linked offset transaction account must include the same name or names indicated in the approved loan application. You can link only one offset transaction account to each Rocket Loan.
CBA Multiple Offset Accounts
CBA’s Everyday Offset account is designed to help you pay less interest and speed up the time it takes to pay your home loan off.
You can link your CBA Multiple Offset Accounts - individual and/or joint accounts - to your eligible home loan, thus benefiting from the flexibility to manage your money in the best way for you.
For example, you and your partner can maintain separate Everyday offset accounts, yet the balances in each will work towards offsetting the balance of your joint home loan.
You can conveniently access your savings using multiple options, including your CommBank keycard or Mastercard debit card, in a branch or online in NetBank or the CommBank app.
ANZ Offset Accounts
If you have money sitting in an everyday banking account, you may consider moving it into an ANZ One offset account. Then link the offset account to your eligible home loan, including an ANZ Standard Variable loan or one-year ANZ Fixed loan at a nominal $10 servicing fee per month.
This move can help you save on interest repayment charges as your money in ANZ One will offset the amount you owe on your home loan. You will be charged interest on the difference only.
St George Multiple Offset Accounts
The St George Multiple Offset Accounts facility allows you to link up to 99 St.George offset accounts. When calculating interest daily, the balances in your linked offset accounts are offset against the amount repayable on your home loan.
While the interest is calculated daily, it is charged monthly only on the net amount, i.e., your loan balance minus less your transaction account balance.
Me Bank Multiple Offset Accounts
ME offers home loan borrowers 100% offset accounts. The Me Bank Multiple Offset Accounts lets you link up to eight offset accounts to any variable-rate Flexible Home Loan.
You may open the offset account(s) when you take the loan, or you could set it up later.
Bankwest Multiple Offset Accounts
With your eligible Bankwest home loan, you can open multiple offset accounts and use them for your spending money and savings.
BankwestMultiple Offset Accounts facility permits you to link up to nine offset accounts included in your Complete Home Loan Package.
If you don’t have an eligible Complete Variable or Complete Fixed Home Loan, monthly offset fees may apply for each offset account. Nonetheless, the Bankwest Multiple Offset Accounts are perfect for helping you manage your money and save on interest repayments.
Bank of Melbourne Multiple Offset Accounts
You can link up to 99 Bank of Melbourne offset accounts, which means that every dollar sitting in each of these accounts offsets your home loan’s interest and helps you become a homeowner sooner.
Use the Joust Mortgage Calculator With Offset Account
Get the Joust advantage! Use Joust’s mortgage calculator with an offset account to know how much you can save if you choose the offsets option to repay your loan.
The easy-to-use home loan offset calculator gives you instant feedback. It works by first reducing your loan amount by the sum in your offset account and then providing an estimate of your weekly, fortnightly, or monthly repayment.
Joust offers home loan buyers a highly secure environment using the latest technology. In addition, the Joust platform is entirely free to use, and there’s no obligation or pressure to proceed.
*The information in this blog article is current as of April 21, 2022 and is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.