The Big Money Mistake That Could Be Costing You Thousands

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Are you making the most of your offset account? If you're like nearly half of Australian mortgage holders, chances are…you're not.

In today’s climate of rising interest rates and tighter household budgets, your offset account isn’t just a banking feature, it’s a financial weapon. Used the right way, it can cut years off your home loan and save you tens of thousands in interest. Used the wrong way? You could be leaving serious money on the table.

In this blog, we break down exactly how to use your offset account to your advantage and avoid one of the most common mistakes costing Aussies big time.

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What Is an Offset Account, and Why Should You Care?

An offset account is a bank account linked to your home loan. Instead of earning interest like a savings account (which is taxable), the balance in your offset account reduces your loan principal for interest calculation purposes.

For example, if you have a $600,000 loan and $100,000 in your offset account, you're only charged interest on $500,000. With daily compounding, even a modest balance like $10,000–$50,000 can deliver meaningful, tax-free savings over the life of your loan.

Let’s say you’ve got $50,000 in your offset at a 6% interest rate. That’s roughly $3,000 in annual savings — and tax-free. Put that same money in a regular savings account earning 4%? You’ll pocket less than $1,700 after tax. See the difference?

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Why Most Aussies Are Getting It Wrong

In 2023, a Finder survey revealed that 23% of Australians don't fully understand how offset accounts work. This lack of awareness often leads to missed opportunities to reduce mortgage interest and build long-term wealth.

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When you use your offset like a regular transaction account, spend your income before it can offset interest, or split your savings into different accounts, you're missing the point. These small mistakes add up to thousands in lost savings and years of extra mortgage repayments.

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Common Offset Account Pitfalls You Should Avoid

Here are a few reasons you might not be seeing the full benefit of your offset account:

• Lack of financial education: Most banks won’t go out of their way to teach you how to pay them less.
• Multiple accounts: Dividing your funds into different buckets might feel organised, but it dilutes your offset power.
• Low balances or irregular income: You might think you don’t have "enough" to make it worthwhile, but every dollar matters when compounded.
• Loan structure: Some loans don’t come with offset features, or people rely on redraws instead, which can create tax headaches later.

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Offset vs Redraw: What’s the Difference?

You’ve probably heard both terms tossed around when it comes to home loans but what exactly sets an offset account apart from a redraw facility? While both can help reduce the amount of interest you pay on your mortgage, they operate differently and come with distinct advantages depending on your goals.

Here’s how they compare:

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The Long-Term Payoff

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Using your offset account effectively means your money is always working for you. Over time, you could:

• Shave 3–5 years off your mortgage
• Save tens of thousands in interest
• Create more room to invest, upgrade, or breathe easier financially

This isn’t about working harder, it’s about using what you already have, smarter.

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Make Your Money Work Harder

In today’s environment of rising interest rates and growing financial pressure, making your money work harder isn’t optional, it’s essential. And if you’ve got an offset account, it shouldn’t just be sitting there. Every financial tool you have should be part of a bigger strategy.

That’s why working with the right professionals, whether it’s your mortgage broker, accountant, or financial planner, is critical to getting the best results.

When it comes to finding the right investment property, Search Property is the expert you want in your corner. As Australia’s trusted buyer’s agency, we help investors secure high-growth, investment-grade properties with confidence.

Don’t leave your financial future to guesswork. Surround yourself with professionals who understand how to grow and protect your wealth, starting with the right property.