Power of Multiple Offset Accounts | Explained and Illustrated

What are multiple offset accounts?

Multiple offsets take the traditional allocation of the one offset account per home loan structure to another level. Multiple offset accounts combine the balance of funds held across multiple bank accounts and link to a single home loan to reduce the amount of interest to be charged.

One key benefit is that borrowers can spread their funds across multiple offset accounts, which can often be helpful for budgeting. At the same time, the collective total of all accounts can offset one single home loan.

In the 12 months to September 2022, CBA reported that the proportion of offset accounts held by borrowers increased by 10%.

Offset account meaning – a reminder

A mortgage offset account is a separate bank account—but linked—to your home loan. People usually use mortgage offset accounts as transaction accounts for day-to-day spending or saving. Offset accounts can help reduce the amount of interest you pay on your home loan.

How do multiple offset accounts work?

Multiple offsets accounts can collectively offset to one single home loan. If you want all available savings to help reduce interest on your home loan, multiple offset accounts can allow you to spread these funds across several bank accounts—all with the offset feature.

Some banks offer more than one offset account, but usually they will restrict you to one offset account per home loan.

Fewer banks offer multiple offset accounts per home loan. This home loan feature can enable borrowers to utilise the cumulative effect of offsetting their interest.

Classic offset account – For the visual person

Below is an illustration of a classic offset set-up. This is the one many banks offer—just one offset account linked to the home loan.

If you have $20,000 in an offset account and another $5,000 of emergency funds in a separate account because, for example, you do not wish to mix funds—it means only $20,000 of your $25,000 is being used to offset the interest on your home loan.

All things being equal, the borrower is leaving some on the table—paying extra home loan interest.

Multiple offset accounts – For the visual person

Multiple offset accounts usually appeal to borrowers who want to spread their cash across more than one account—and still wish to benefit from offsetting home loan interest.

Borrowers can often nickname offset accounts to help keep track of the purpose for each account. For example, one offset account could be for day-to-day spending and another offset account for a different purpose, like holidays.

The above illustration uses the same figures as previous with the difference being the borrowers are using a multiple offsetting strategy. All $25,000 of their savings is being used to offset home loan interest. Plus they have four offset accounts, each with their own purpose as follows:

• Day-to-day spending
• Savings
• Holiday
• Emergency

This is an example of how a multiple offset account feature can be used to make money work for a borrower in reducing the home loan interest owed.

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Are multiple offset accounts worth it?

Before deciding if multiple offset accounts are worth it, one area borrowers should explore are the fees and interest rate they may be charged for taking out a loan with this feature. Any extra fees and costs need to be weighed up against the reasons for using multiple offset accounts.

Here are some reasons why borrowers choose home loans with multiple offset accounts.

Relationship reasons
Couples in a relationship can have wide and varied approaches to dealing with money. Agreeing on a strategy for day-to-day spending and savings can have its difficulties. Couples might use multiple bank accounts to find the balance between sharing money and retaining some control. They might establish some joint accounts for shared purposes (like rent) as well as retaining original accounts for personal transactions like wage deposits, shopping, or fitness.

Now add a home loan to the mix. This is usually a debt that is a shared responsibility.

I should mention there are alternatives to structuring a home loan for a couple without needing a joint home loan. This is something a mortgage broker could investigate for your circumstances.

In the case of a joint home loan, both individuals would usually be motivated to reduce any home loan interest. If the borrowers want an offset account structure and still wish to run their multiple transaction accounts—multiple offset accounts can be considered.

The below illustration shows how multiple offset accounts could potentially be held in different name combinations and still reduce home loan interest.

Keep in mind, offset accounts require accountholders to have eligible offset accounts held with the same bank as their home loan.

Convenience
Some people like seeing their money spread across various accounts. It is a popular way of budgeting some refer to as “bucketing their money”. While potentially higher fees and interest rates should be considered, sometimes a home loan product choice has more to do with how borrowers wish to see their money.

Say you want to visualise your different money buckets and because you have different plans for how you save and spend for each. Example of how people might use different accounts for different purposes are: holidays, school fees, emergency funds, holiday money, etc.

Setting these accounts up as multiple offset accounts means all funds can contribute towards offsetting (reducing) any home loan interest.

Remember, multiple offset accounts are not the only way to use extra savings to get ahead on your home loan. For example, you could consider a classic offset set-up or perhaps redraw.

Investment Strategy
Offset accounts offer borrowers the option to utilise their savings to reduce home loan interest, without paying down a home loan directly—potentially allowing for an investment strategy.

Some investors use multiple offset accounts so there are separate accounts for any investment-related transactions—and still offset home loan interest.

Your full financial position should be considered to know whether multiple offset accounts are right for you, and you should consider obtaining independent legal advice.

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Is there a downside to having multiple offset accounts?

Having multiple offset accounts does not earn you interest. Rather, offset accounts reduce the interest otherwise payable on a home loan.

Multiple offset accounts can come with higher fees and home loan interest rates.

Multiple offset accounts can sometimes lead to more work for the borrowers as there are more accounts to keep track of. Different accounts may have their appeal, but sometimes they can create more work.

So, multiple offset accounts can help you keep track of your money—take care not to lose track.

Who can use multiple offset accounts?

The principle generally shared by lenders who offer offset accounts is that the accountholders for the offsets must also be a borrower on the eligible home loan.

Scenarios sometimes arise that do not quite fit the typical offset criteria. One such example is where parents might wish to use their funds to offset their children’s home loan. This is likely not possible unless the parents are also borrowers on the home loan.

There are a few variations between lenders that offer this feature, including:

• Some lenders allow variations to this offset account ownership. An offset account could be in the name of a single borrower and link to a home loan on which they are a joint borrower.
• Lenders vary in how many separate offsets they will combine for a multiple offset benefit. One Australian lender allows up to 99 multiple offset accounts.
• Some lenders may allow each of the multiple offset accounts to be transactional.
• Some lenders might treat multiple offset accounts as sub-accounts with 100% offsetting but limited transactional functions.

Which banks offer multiple offset accounts?

My guide lists some of the Australian lenders who offer multiple offset accounts. I have listed them in alphabetical order. Multiple offset accounts are one of many features that need to be considered when choosing the right home loan for your circumstances.

My list only mentions some lenders that can combine the balance of more than one offset account when calculating the interest benefit on a home loan—this is a unique feature worth highlighting.

It is a good guide but as any of my readers know, this feature needs to match your requirements and objectives, be suitable for your financial situation, and any eligibility will ultimately be determined by the lender.

AMP – Offset Deposit Account

Overview – AMP

The AMP Offset Deposit Account allows borrowers to use the combined balances of up to 10 accounts to offset a home loan.

Bankwest Offset Account

Overview – Bankwest

The Bankwest Offset Account is a 100% offset feature for variable loans and also a partial offset for eligible fixed loans at 40%. Meaning if you have $1,000 in an offset to a fixed loan, $400 is the amount used in offset calculations.

Allowing any combination of borrower names on offset accounts gives flexibility to borrowers who want separate and joint accounts. They can all work towards home loan interest reduction.

Commbank Everyday Offset Account

Overview – Commbank

Commbank is the only one of the big four Australian banks to offer a multiple offset account solution. The Commbank offset account is called an Everyday Offset. Many existing accounts can be converted to an Everyday Offset without changing account numbers which is convenient for existing customers.

Any combination of borrower names are allowed on offset accounts. 99 offset accounts per loan accounts should cater for the most detailed of bucketing enthusiasts.

Macquarie Offset Account

Overview – Macquarie

The Macquarie Offset Home Loan allows 10 offsets per loan account. All account balances can combine to offset a single eligible home loan.

Suncorp Mortgage Offset

Overview – Suncorp

The Suncorp Mortgage Offset uses an Everyday Options Account with an Offset Mode. You can add up to 9 sub-accounts under the main account to maximise any offset benefits.

Multiple offset accounts – Illustration

Considerations

A home loan is not a one size fits all.

Even if offset accounts do sound appealing, the loan that it pairs with may not be a suitable loan option, so make sure you fully review home loan options before proceeding. This list is not a recommendation as the suitability of any home loan and its features depends on your individual circumstances and lender eligibility.

Use a professional to clarify inevitable areas of confusion around multiple offset accounts.

A bank can quite rightly say it offers more than one offset account, but the real question for the lender:

Is the balance of these multiple offset accounts combined to offset interest for one single home loan?

Final word

Multiple offset accounts have evolved since the introduction of the offsetting feature for Australian home loans. If used correctly, they can be both a powerful offsetting and money-tracking feature.

Whether or not multiple offset accounts are worth it will, in part, come down to how you use your money. If one of your objectives is to spread your money across different accounts and offset your home loan, then a multiple offset feature may be a good option.