While a lot of us look for offset accounts when comparing home loans, it’s important to check if these mortgages also charge extra fees. While an offset account can help you pay off your loan faster and save money on interest, it might not provide as much value if you also have to pay an annual fee. 

Home loans with free offset accounts may be able to provide valuable benefits without requiring extra costs. Compare different options before you apply, so you can be confident in the value that different home loans offer. 

Find and compare free offset home loans

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3.03%

Variable

2.70%

UBank

$758

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

1.98

/ 5
More details

2.59%

Variable

3.00%

AMP Bank

$1,359

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

3.25

/ 5
More details

2.73%

Fixed - 1 year

3.23%

Adelaide Bank

$683

Redraw facility
Offset Account
Borrow up to 79.9999%
Extra Repayments
Interest Only
Owner Occupied

2.20

/ 5
More details

2.94%

Variable

3.34%

Newcastle Permanent

$1,413

Redraw facility
Offset Account
Borrow up to 80%
Extra Repayments
Interest Only
Owner Occupied

2.51

/ 5
More details

3.39%

Variable

3.59%

Pepper

$1,484

Redraw facility
Offset Account
Borrow up to 85%
Extra Repayments
Interest Only
Owner Occupied

1.85

/ 5
More details

Learn more about home loans

What are home loans with free offset accounts?

Offset accounts work like regular savings or transaction accounts that are linked to your home loan. Any money saved in your offset account is included when your lender is calculating your home loan interest charges. 

For example, if you had a $500,000 mortgage, and kept $20,000 saved in a 100 per cent offset account, you’ll be charged interest as if you only owed $480,000. 

When you’re charged less interest on your mortgage, more of each payment can go towards repaying your loan’s principal. This means an offset account can help you put extra money towards your home loan, so you may be able to pay off your property sooner and save money on interest charges. 

The more features and benefits a mortgage lender offers, the more likely they are to charge you a higher interest rate or extra fees. Some lenders may charge a monthly or annual fee on your offset account, which may reduce the value it offers overall. 

However, there are also plenty of mortgage lenders that offer free offset accounts, where you won’t need to pay an extra fee to access an offset account. This may allow you to enjoy more interest savings on your home loan and clear your debt faster, without having to worry about as many extra costs. 

How do home loans with free offset accounts compare to other home loans?

It’s important to check all of the usual features and benefits when comparing home loans with free offset accounts. Look at what you’d pay in fees and interest charges and compare this cost to the estimated value you could enjoy from any other features and benefits. 

Keep in mind even if a home loan doesn’t charge an extra fee specifically for the offset account, that doesn’t mean the offset account is completely free. Sometimes a home loan with a free offset account will have a higher interest rate or charge a higher annual fee than the next home loan. Even with the potential interest savings, you could end up paying more for a home loan with an offset account than you would for a more basic “no-frills” home loan with a low interest rate and no fees.  

To get a better idea of a home loan’s overall cost, look at its comparison rate. This figure combines a loan’s interest rate with the cost of its standard fees and charges, so you can tell at a glance which loans may cost you more in total. 

What are the main benefits of home loans with free offset accounts?

If you have some savings available, a free offset account may allow these savings to work for you by reducing the amount of interest you pay on your home loan. The more money you can keep saved in your offset account, the more you may be able to save in interest charges on your home loan, and the faster you may be able to pay off your property.

For example, if you had a mortgage of $500,000, and kept $20,000 saved in your offset account, interest will only be charged on $480,000. Daily interest is thus calculated on a lower amount and you may therefore be able to pay off the loan more quickly than expected. Assuming a 3 per cent interest rate and a 30-year loan term, you could pay off this mortgage 22 months sooner and save over $27,000 in interest charges (hypothetical example for illustrative purposes only).

What should you consider before you apply for a home loan with a free offset account?

Before you apply for any home loan, it’s important to check the fine print to make sure you are getting exactly what you expect. As well as looking at the interest rates, fees, features and other benefits, there’s more to consider if you’re looking at home loans with free offset accounts. 

Check if your home loan offers a 100 per cent offset account, where the full offset account balance is deducted from your home loan balance before interest is calculated for the day. 

Check if you can deposit and withdraw funds from the account when you want to, either online, through a teller or at an ATM, and if any fees apply. There may be times when you need to access cash from your savings, though it’s important to consider how reducing your offset account balance may affect your home loan’s interest charges. 

Frequently asked questions

How does an offset account work?

An offset account functions as a transaction account that is linked to your home loan. The balance of this account is offset daily against the loan amount and reduces the amount of principal that you pay interest on.

By using an offset account it’s possible to reduce the length of your loan and the total amount of interest payed by thousands of dollars. 

Example: If you have a mortgage of $500,000 but holding an offset account with $50,000, you will only pay interest on $450,000 rather then $500,000.

What is an ongoing fee?

Ongoing fees are any regular payments charged by your lender in addition to the interest they apply including annual fees, monthly account keeping fees and offset fees. The average annual fee is close to $200 however there are almost 2,000 home loan products that don’t charge an annual fee at all. There’s plenty of extra costs when you’re buying a home, such as conveyancing, stamp duty, moving costs, so the more fees you can avoid on your home loan, the better. While $200 might not seem like much in the grand scheme of things, it adds up to $6,000 over the life of a 30 year loan – money which would be much better off either reinvested into your home loan or in your back pocket for the next rainy day.

Example: Anna is tossing up between two different mortgage products. Both have the same variable interest rate, but one has a monthly account keeping fee of $20. By picking the loan with no fees, and investing an extra $20 a month into her loan, Josie will end up shaving 6 months off her 30 year loan and saving over $9,000* in interest repayments.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

I have a poor credit rating. Am I still able to get a mortgage?

Some lenders still allow you to apply for a home loan if you have impaired credit. However, you may pay a slightly higher interest rate and/or higher fees. This is to help offset the higher risk that you may default on your repayments.

How can I pay off my home loan faster?

The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.

Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

What is 'principal and interest'?

‘Principal and interest’ loans are the most common type of home loans on the market. The principal part of the loan is the initial sum lent to the customer and the interest is the money paid on top of this, at the agreed interest rate, until the end of the loan.

By reducing the principal amount, the total of interest charged will also become smaller until eventually the debt is paid off in full.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

Can I get a home loan if I am on an employment contract?

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.

I can't pick a loan. Should I apply to multiple lenders?

Applying for home loans with multiple lenders at once can affect your credit history, as multiple loan applications in short succession can make you look like a risky borrower. Comparing home loans from different lenders, assessing their features and benefits, and making one application to a preferred lender may help to improve your chances of success