Can You Have Multiple Offset Accounts?

How do multiple offset accounts work?

An offset account is a type of transaction account linked to a mortgage. You can use one to offset the amount owed and the interest payable on your mortgage. For example, if you owe $300,000 on your mortgage and have $50,000 in an offset account, you only pay interest on $250,000.

Over time, an offset account could save you hundreds of thousands of dollars throughout your mortgage. Those benefits can multiply when you have multiple offset accounts because the more money you keep in your accounts, the more you stand to save on interest payments.

With multiple offset accounts — when two or more offset accounts are attached to the same mortgage — your mortgage is offset by the combined value of the funds in all the accounts. So, if you have $50,000 in one offset account and $30,000 in another, your combined value is $80,000. That means if you owe $300,000 on your mortgage, you’ll now only pay interest on $220,000.

Beyond that, offset accounts operate more or less the same, no matter how many you open:

Your money should always be available immediately, and you can withdraw it using a debit card or from an ATM.
The accounts will offset your mortgage either fully or partially. With a full offset, every dollar goes toward reducing your mortgage debt, while a partial offset account only offsets an agreed-upon percentage of the mortgage.
You generally can only link your accounts to one specific mortgage.
You can’t use the same offset account across different mortgages or lenders.

» MORE: How to make the most of your offset account

Which banks offer multiple offset accounts?

Most of Australia’s leading banks provide a multiple-offset feature, including the Big Four (Commonwealth, ANZ, NAB and Westpac) and Macquarie Bank, which offers a comprehensive Offset Home Loan package.

Multiple offset accounts, and offset accounts in general, are usually only available on variable interest loans, not fixed ones. However, check with your lender first.

Some lenders only offer partial offset facilities or require a minimum balance for offset accounts. Additionally, each lender will have different rules regarding how many offset accounts someone can link to one mortgage.

» MORE: What’s the difference between a redraw facility and an offset account?

Should you have multiple offset accounts?

Having multiple offset accounts can be helpful, but there are pitfalls to this strategy to consider. Moreover, every lender’s offset features and fee structures will be unique. So, talk to a mortgage broker or a financial adviser to navigate the complexities of offsets.

Advantages

Many uses

Having more than one offset account gives you greater flexibility in handling your finances. You could, for example, have different offset accounts for everything, including:

Daily living expenses
Credit card bills and utility payments
Holidays
Investments
Home improvement and renovation
School fees
Healthcare
Emergency costs.

» MORE: What is an emergency fund?

Greater flexibility

Having multiple offset accounts also helps you stay organised while simultaneously letting you keep better track of your spending. So, if you’re sufficiently organised, you can use different accounts to compartmentalise your spending and budget efficiently.

» MORE: How long will it take pay off my mortgage?

Further interest reductions

Offset accounts are designed to reduce the amount of interest payable on your mortgage. So, the more accounts, the better — especially if they’re working towards the same goal. You could, for example, have an account for emergencies that you pay $200 a month into, as well as your everyday expense account. If no emergency arises, that extra amount will significantly reduce your total repayments over the mortgage’s entire term.

» MORE: How does a work amortisation schedule work?

Easy management for joint borrowers

Multiple offsets make it easier for joint mortgagees to track expenditures and contribute to an earlier repayment term. This strategy also allows for some personal financial flexibility while working towards a shared goal where every dollar paid into an offset account on salary day for both you and your partner is a dollar taken off the mortgage.

» MORE: Is buying a house with a friend a good idea?

Disadvantages

More fees

When all is said and done, offset accounts are bank accounts — and bank accounts attract fees. These may differ widely between lenders, but they could also add up. That’s especially true if your lender charges you for every offset account you have attached to the mortgage. Full offset accounts often come with higher accompanying fees, too.

So, check with your lender and shop around for lower fees wherever possible. Otherwise, those extra costs may eat into your savings.

» MORE: Costs to know when buying a house

Restrictions

You may not be eligible for an offset account if you have a fixed loan — or, you may only be permitted a partial offset, for example. So, check with your lender about the criteria and restrictions to see if any apply to you.

» MORE: Should you fix your home loan?

Higher interest rates

Mortgages with offset account features often have higher accompanying interest rates, too. So, do your research and inform your broker that you want to avoid higher rates wherever possible, even if you really want an offset account.

» MORE: What is a comparison rate?

Higher deposit

Offset accounts usually require a larger deposit for you to fully benefit from them, in the short-term anyway, given that fees could negate any gains. So, an offset account may not necessarily be the best financial instrument at the outset of your mortgage.

Is an offset account worth it for you? The trick is to see where you stand after factoring in the associated charges. That calculation will help you determine whether you are better off with a redraw facility instead, for example.