Multiple offset accounts explained

If you’re reading this, you may know that an offset account can help reduce interest payable on your home loan while working towards a savings goal. So, what happens when you throw another offset account in the mix? Keep reading to find out.

P.S. if you have a home loan and are looking to help maximise savings and make budgeting simpler, this may be one for you.

But first, what is an offset account again?

An offset account is a transactional account linked to a home loan that can help you reduce the amount of interest payable for the home loan. Interest is charged based on the difference between your loan balance and the balance of the offset account.

For example:

Essentially, the more money in your offset account, the less interest you pay on your home loan.

P&N Bank has a dedicated Offset Home Loan available for owner occupiers.

How do multiple offset accounts work?

Multiple offset accounts take this idea of ‘offsetting’ your loan balance, one step further. By linking several offset accounts to your home loan, they collectively help to further contribute to reducing your interest payments.

Take the previous example:

  We know Beth already has a $600,000 home loan and $30,000 in a 100% offset account attached to her loan. Say she also keeps these funds elsewhere:

• $2,000 in savings for a new bike
• $8,000 in a transaction account for emergencies

Rather than keeping these additional funds in separate accounts that don’t offset her loan, Beth opens two more 100% offset accounts and allocates her money by goal. Now she has a collective total of $40,000 ($30,000 + $2,000 + $8,000) in offset accounts. This means interest on her $600,000 home loan is only calculated on $560,000 ($10,000 less than when she only had one offset account) while she still has access to these funds whenever she needs them.*

Why have multiple offset accounts?

Home loan interest rates are generally higher than any interest earnt on savings. Where a single offset account may minimise interest calculated over the lifetime of your loan, it can fall short when it comes to maximising your savings. That’s where multiple offsets come in.

Benefits

• Maximise interest savings. Having a higher combined offset balance reduces the portion of your loan that interest is calculated on. This may helps you pay less over time.
• Simplified budgeting. Splitting your offset into multiple ‘buckets’ can make it easier to manage spending and savings for different goals. Learn more about budgeting in buckets.
• Flexibility for joint accounts. Multiple offsets allow borrowers to contribute towards reducing their loan balance while still maintaining a level of financial independence.
• Easy access to your funds. Your money remains accessible, while continuing to work hard to reduce the interest payable on your home loan.

A great place to start when considering what account if right for you, is to compare. Use one of our handy savings or home loan calculators to see if it’s worth making the switch.

How can I structure multiple offset accounts?

Categorising your offset accounts by their purpose can be a clear-cut way to help manage your money. It’s a little something the internet likes to call 'budgeting in buckets'.  

Just got paid? That goes straight into the wages and bills bucket. You’re saving for something? There’s a bucket for that. You sometimes treat yourself to a morning coffee? We think you know where we’re going.

The more offset buckets you have alongside your home loan, the more strategic you can be with your savings. At P&N Bank you can link up to three & Access Offset accounts (whether in single or joint names) to an eligible home loan.^

If you’re an individual your offset buckets could look like this:

• Offset account #1: Income and bills – this is where your pay is deposited, and your bills come out of. 
• Offset account #2: Treats and spending – this is where you allocate a portion of your salary for the nice to haves. Things like your morning coffee, eating out, and other activities. 
• Offset account #3: Savings and safety net – this is where your bigger purchases or emergency fund can sit. Things like buying a new car.

Multiple offsets can also be structured to suit joint home loan borrowers.

If you’re a joint borrower your set-up might look like this:

• Offset account #1: Your day-to-day account – this is where your pay is deposited, and your bills and day-to-day purchases come out of. It could include money for odd jobs, and your takeaway coffees.
• Offset account #2: Your partner’s day-to-day account – this is where your co-borrower may deposit their wages and pay for bills and day-to-day expenses out of.
• Offset account #3: Shared goals and future planning – this is where money could be dedicated for things like home maintenance, renovations, and longer-term financial goals.

Bucket budgeting is one way for you to track your spending and allocate your money wisely, while helping to contribute to your goal of reducing the interest payable on your home loan.

How do I open multiple offset accounts with P&N Bank?

First, you need to have an eligible P&N Bank home loan. Once that’s sorted, you can link up to three offset accounts to your home loan. This includes any existing & Transaction Account that you switch to an offset account. Head to how do I open more offset accounts to learn more.

Important information

Banking and Credit products issued by Police & Nurses Limited (P&N Bank).

Any advice does not take into account your objectives, financial situation or needs. Read the relevant terms and conditions, before downloading apps or acquiring any product, in considering and deciding whether it is right for you. The Target Market Determinations (TMDs) are available on our website or upon request.