What an offset account actually saves you.

An everyday transaction account linked to your home loan. Whatever sits in it is subtracted from your loan balance before the lender works out that month's interest. Put $25,000 in an offset against a $650,000 loan and the lender charges interest on $625,000. The money stays yours - you can spend it tomorrow - which is the entire difference between an offset and paying the loan down.

More than most people expect, because it compounds. On a $650,000 loan at 6% over 30 years, holding $25,000 in offset saves about $113,001 in interest and takes roughly 2.3 years off the term - without changing your repayment by a dollar. The tables above show the range.

For anyone with a mortgage, almost always - and the reason is tax. Offset savings are not income, so they are not taxed. Savings interest is. At 6% on the top marginal rate, a savings account would need to pay 11.32% before tax to leave you the same amount, and nothing pays that. The one caveat is fees: an offset usually sits inside a package with an annual fee, so on a small balance the fee can outweigh the saving.

Redraw is money you have already paid off the loan and can ask for back. Offset is money that was never paid off the loan and is simply parked beside it. Both reduce interest by the same arithmetic. The differences that matter are access and tax: redraw can be restricted, reduced or withdrawn by the lender, while offset money is yours in a transaction account - and for anyone who might turn the property into an investment later, redrawing muddies the deductibility of the debt in a way an offset does not. If that is on your horizon, take advice before you use redraw.

No, and nobody does. Interest is calculated on the daily balance, so every dollar counts for every day it sits there - a salary landing on the 15th and draining by the 30th still earns its keep. The figures on this page assume a steady balance because that is the only way to model it honestly over 30 years. Treat them as what a consistently maintained balance is worth, not a prediction.

Sometimes, and usually with conditions - many lenders offer only a partial offset on fixed rates, or cap the balance, or do not offer one at all. It is one of the real trade-offs of fixing. If an offset matters to you, it is worth checking before you fix rather than after, and a split loan (part fixed, part variable with the offset on the variable portion) is the usual way people keep both.

Usually, but not always. Some lenders allow multiple offsets against one loan, which suits people who like separate buckets for the emergency fund, the tax bill and the holiday. The arithmetic is identical - it is the total sitting across them that counts - so choose on how you actually manage money, not on the maths.