$50,000 Is Sitting in the Wrong Account: A Refinance + Offset Case Study

Here's a situation we see often: a client with a solid $50,000 in savings, doing everything "right" by their own instincts — except that money is sitting in an account at a completely different bank to their mortgage, quietly earning a lot less than it could be. We ran the real numbers on what changes when that gets fixed.

The starting position

A client has a $400,000 home loan with 25 years remaining, currently at 6.29% with their existing bank. Separately, they hold $50,000 in savings in a CBA NetBank Saver account — a perfectly good savings account, just not linked to their mortgage in any way, and not with the same bank that holds their loan.

We're currently looking at refinancing their loan to a new lender offering 5.93%, plus a $2,888 cashback paid at settlement. The new loan comes with an offset account — and moving that $50,000 into it, rather than leaving it where it is, turns out to matter more than the rate change itself.

Why the savings account is quietly costing them

CBA's NetBank Saver currently pays an ongoing variable rate of 2.10% p.a. once you're past any introductory bonus period. On $50,000, that's a little over $1,000 a year — and critically, that interest is taxable income. At a 30% marginal tax rate, roughly $300 of it goes straight to the ATO, leaving around $740 actually in the client's pocket after a full year.

Compare that to an offset account: money sitting in offset doesn't earn interest directly — instead, it reduces the loan balance your interest is calculated on. On this loan, that's equivalent to a return of 5.93% — the full mortgage rate — and because it's a reduction in interest charged rather than income earned, it isn't taxed at all. The full benefit lands in the client's position, every dollar of it.

*Isolated benefit of moving the existing $50,000 into offset, year one, at the new 5.93% rate — separate from the interest saved by the rate change itself.

What refinancing and offsetting actually saves, in dollars

We modelled two paths side by side: staying exactly where they are, versus refinancing to 5.93% and moving the $50,000 into the new loan's offset account. Both scenarios assume the client simply makes their normal minimum repayment — no extra effort, no belt-tightening, just a smarter structure.

The full picture, including the cashback and the tax difference

Interest saved is only part of the story. Add in the $2,888 refinance cashback received upfront, and account for the fact that the savings account interest would have been taxed while the offset benefit isn't, and the gap widens further:

After 1 year, the client is roughly $5,573 better off overall. After 2 years, $8,429. After 5 years, the gap has grown to roughly $18,124 — and that's before accounting for the fact that a lower loan balance also means less interest in every year that follows.

Worth knowing before moving ahead

• These figures assume the client keeps making the same minimum repayment throughout — if they kept repayments at their current higher dollar amount after refinancing to the lower rate, the loan would clear even faster and the gap would be larger still.

• Refinancing typically involves a small discharge fee from the current lender (often $150–$400) and possibly a new lender's settlement fee — in most cases these are comfortably covered by the $2,888 cashback, but worth confirming the exact figures before proceeding.

• The 30% tax rate used above is illustrative — the exact benefit of moving out of a taxable savings account depends on your actual marginal tax rate, so your real numbers may vary slightly.

• As with any offset account, the benefit only holds if the money stays there — we've written separately about and the discipline that comes with a growing balance.

Curious what refinancing could do for your own numbers?

This article is general information only and does not take into account your personal financial situation, needs, or objectives. It is not financial or tax advice. Figures are illustrative estimates based on the scenario described, using publicly available rates current as at time of writing, and may not reflect your circumstances or the exact rates available to you. Interest rates, fees, and cashback offers are subject to change and lender approval. Please seek independent financial and/or tax advice before making decisions about your home loan. Ian Freeman is a Credit Representative (Credit Representative Number 439731) of Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704.