Partial Offset vs 100% Offset: What’s the Difference?

Offset Accounts Explained: How They Work and Save You Money

One feature that can make a home loan more attractive is the option to link it with an offset account. This setup reduces the interest charged and can save you thousands over the life of your mortgage.

What Is an Offset Account?

An offset account works like a regular transaction account but ties directly to your mortgage. Instead of earning interest, the balance reduces the principal used to calculate loan interest.

For example, if you owe $300,000 on your home loan and keep $50,000 in your offset account, the bank charges interest only on $250,000. Over time, this can shorten your loan term significantly.

Unlike extra repayments, your money remains flexible—you can withdraw it whenever needed.

How Does It Work?

Everyday Access

Use a debit card or ATM to access funds. It functions like a standard account, so your money is always within reach.

Lower Interest

The balance directly cuts down the interest charged. For example, a loan of $200,000 with $20,000 offset means you pay interest on $180,000 only.

Salary Deposits

Many borrowers have their income paid straight into the account. This keeps the balance higher for longer, boosting savings.

Goal Saving

You can use it to set aside money for renovations, holidays, or other expenses—while still reducing loan costs.

Emergency Buffer

Since funds are accessible at any time, the account also works as a safety net for unexpected bills.

👉 Learn more from MoneySmart’s official guide.

👉 You may also like our comparison of redraw facilities vs. offset accounts.

Account Types: Partial vs. Full Explained

Not all linked accounts work in the same way. When comparing mortgages, you’ll usually come across partial and full options. Here’s how they differ.

Partial

A partial arrangement reduces interest only by a percentage of your balance.

For example, if you have $50,000 in a partial setup and your lender applies 50%, only $25,000 offsets your mortgage. If your loan is $200,000, the bank calculates interest on $175,000 instead of the full amount.

This offers some savings but usually less than the full option. Lenders often attach partial setups to basic loans with lower fees.

Full

A full account (also called 100%) applies your entire balance against the home loan.

For instance, with $50,000 in a full setup and a mortgage of $200,000, you only pay interest on $150,000. This option provides maximum savings and can significantly reduce the loan term.

Which One Should You Choose?

A partial version may suit you if you prefer lower account fees but still want some interest relief.
A full version is ideal if you keep higher balances and want the greatest savings.

👉 See the ASIC guide on linked accounts.

👉 Compare with our article on redraw facilities.