An offset account can be a valuable feature of a home loan, helping you reduce the amount of interest you pay while still giving you access to your savings.

But simply having an account labelled as an “offset” does not necessarily mean it is working exactly as you expect.

If an offset account is incorrectly linked, linked to the wrong loan, or affected by changes to your loan structure, you may not receive the full benefit. Because offset savings are not always clearly shown as a separate line item on your loan statement, it can be easy to assume everything is working correctly without checking.

A regular review can help you make sure your offset is set up correctly and continues to suit your circumstances.

1. Check that your offset is linked to the correct loan

If you have multiple home loans or loan splits, it is particularly important to check which loan your offset account is linked to.

Depending on your lender, you may be able to check this through your online banking or mobile app under sections such as Loan Details, Linked Accounts or Offset Accounts.

Check that:

• Your offset account is listed
• It is linked to the intended home loan
• Any additional offset accounts are linked correctly
• The account has not been accidentally linked to another loan or loan split

If you cannot confirm the setup yourself, contact your lender and ask them to verify the linked accounts and how the offset balance is being applied.

2. Understand how an offset account can reduce interest

An offset account generally works by reducing the loan balance used to calculate interest.

• For example, if you have:
• Home loan: $500,000
• Offset balance: $50,000
• Interest rate: 6%

Assuming the offset balance remains consistent and the loan terms allow for a full offset, interest may generally be calculated on approximately $450,000 rather than $500,000.

At a simple annualised level, the difference could be significant:

$50,000 × 6% = $3,000

That represents the potential annual interest saving before considering changes in the offset balance, loan repayments and the way your lender calculates interest.

However, this is only an illustration.

Home loan interest is generally calculated daily, so the actual benefit will depend on your daily loan and offset balances. If you regularly move money in and out of your offset account, the amount of interest charged can change from day to day.

This is why your actual interest charges may not match a simple monthly calculation.

3. Review your offset after making changes to your loan

Your offset account is particularly worth checking after a major change to your mortgage or banking arrangements.

Consider reviewing your setup after:

• Purchasing a new property
• Refinancing your home loan
• Changing lenders
• Switching loan products
• Opening or closing an offset account
• Splitting or restructuring your loan
• Consolidating loans
• Changing the way your everyday banking is set up

When a loan is refinanced or restructured, it is important to confirm that your offset arrangement has been established correctly under the new loan.

Don't assume that your previous setup has automatically carried across.

4. Look beyond your interest rate

When reviewing your home loan, the interest rate is only one part of the picture.

Other factors can affect whether your loan remains suitable, including:

• Offset account availability and structure
• Loan features
• Fixed versus variable arrangements
• Loan term
• Repayment structure
• Fees and charges
• Your current financial circumstances
• Your future plans

For example, a slightly lower interest rate may not necessarily provide the best overall outcome if it means losing a feature you regularly use, such as a suitable offset facility.

The right loan structure depends on your individual circumstances and goals.

What if your offset doesn't appear to be working correctly?

If something doesn't look right, your first step should be to contact your lender and ask them to review the account.

It can be useful to keep records of:

• Your home loan balance
• Your offset balance
• Loan and account statements
• The date the offset was opened or linked
• Any changes made to your loan
• Correspondence with your lender

If you believe an error has resulted in additional interest being charged, ask your lender to investigate and explain how the interest was calculated.

You may also wish to speak with your mortgage broker, particularly if the issue relates to a recent refinance, loan restructure or change in loan product.

How often should you review your home loan?

A home loan shouldn't necessarily be a “set and forget” arrangement.

Your circumstances can change, and so can interest rates, lender policies, loan products and available features.

As a general guide, it can be worthwhile reviewing your home loan periodically and particularly after a significant change in your financial circumstances.

If it has been more than two years since you last reviewed your mortgage, it may be worth taking another look at whether your current loan structure remains appropriate.

At Medico Loan, we help medical professionals review their home loan arrangements and understand the options available to them.

We can assess areas such as your current interest rate, loan structure, offset arrangements and potential refinancing opportunities, depending on your circumstances.

Your home loan should work as hard as you do

An offset account can be a useful tool for reducing home loan interest, but only when it is structured and used appropriately.

Taking a few minutes to check how your offset is linked, and reviewing your overall home loan periodically — can help you make sure your mortgage continues to support your financial goals.

Need help reviewing your home loan?

If you're unsure whether your offset account is set up correctly, or you would like to review your current home loan structure, Medico Loan can help you explore your options.

Our team specialises in helping medical professionals navigate home lending and understand loan solutions that may suit their circumstances.

General information only. This article does not constitute financial advice. Loan features, interest calculations, offset arrangements, eligibility criteria and lending policies vary between lenders. The examples provided are illustrative only and should not be relied upon for your individual circumstances. Please refer to your loan documents or speak with your lender or qualified finance professional for information specific to your situation.