An offset account is your everyday account that is connected to your home loan. Within the offset account, you can deposit your savings and salary; the difference/balance is then offset corresponding to your home loan amount. Most banks will allow your everyday savings account to be linked to a variable rate loan, so you do not pay interest on the money sitting in your savings account, thus offsetting the interest payable on it. For example, your variable loan is $500k, and you have $100k sitting in your savings account that day, you will only be charged interest on $400k in this instance. Note: A couple of banks provide a full offset account with a fix rate product, but this is not common.