Confirm the account is linked to the right loan
An offset is a separate transaction account whose eligible balance reduces the loan amount used to calculate interest. It does not pay down the mortgage principal simply by holding cash. Ask your lender to confirm the account number, linked loan number, effective link date and whether your loan product supports the feature.
If your mortgage has multiple splits, check which split is linked. Money offsetting one eligible split may not offset the others. A transaction account opened alongside a mortgage is not automatically an offset account.
Check whether it is a full or partial offset
With a 100% offset, an eligible $20,000 balance against a $500,000 loan would generally mean interest is calculated on $480,000 for that day. This is a hypothetical illustration; your lender's terms and calculation method apply. A partial offset gives a smaller benefit, and some products place conditions on the arrangement.
Look beyond the repayment amount
Interest savings do not necessarily reduce your scheduled repayment. On a principal-and-interest loan, more of an unchanged repayment may instead go towards reducing principal. Check your loan statement and ask the lender how it shows offset benefits. A month-end account balance alone cannot reproduce an interest charge because balances and rates may change throughout the month.
Recheck after refinancing or switching products
Do not assume an offset link survives a product change, refinance or account replacement. Confirm it again once the change is complete. If you move lenders, verify that salary payments, direct debits and any regular transfers use the intended new account.
Make sure the feature earns its keep
Compare the interest benefit from your realistic average balance with additional package fees, account fees and any higher loan rate. A useful feature for one household may be poor value for another. Keep access needs in mind when comparing an offset with redraw, which operates under different conditions.
Act promptly if something looks wrong
Ask the lender to investigate the link and interest calculations, and keep copies of account-opening instructions and statements. Request a written explanation of any correction. If it remains unresolved, use the lender's complaints process; external dispute resolution through AFCA may be available.
Further reading
ASIC Moneysmart: mortgage offset accounts.
General information only, not personal financial, tax or legal advice. Examples are hypothetical. Offset eligibility, fees and access conditions vary by lender and product.