How an offset account saves you interest

0:00What is an offset account? An offset account is nothing except it's a normal day-to-day savings account. The only difference is if the money is parked in that offset account, you save on the interest. Let's give an example. Let's say in your loan account you have a $500,000 loan balance. Let's say today you have $50,000 sitting in the offset account. So the bank is going to calculate

0:22the interest on the net amount which is $450,000. These interest calculations happen every single day. It usually comes with either a monthly fees or a yearly fees. Some banks charge a very slightly higher interest rate when providing an offset account.