Offset account.

Mechanic: a transaction or savings account linked to your home loan. The lender doesn't physically transfer the offset balance to repay the loan. Instead, when calculating daily interest, the lender uses (loan balance − offset balance). So $50K parked in offset reduces the daily interest charge by exactly the rate × $50K / 365.

Why offset over redraw or extra-payments: (a) full liquidity, money in offset is still in your transaction account and can be withdrawn any time without lender approval; (b) tax-clean for investors, interest deductibility traceability is preserved, redraws on an investment loan can break TR 2000/2 deductibility tests; (c) no rate-hike triggered by accessing the funds.

100% offset vs partial offset: most major-bank offset accounts are 100% offset (every dollar offsets dollar-for-dollar). Some non-majors offer 'partial' offset (e.g. only first $50K offsets at 100%, balance offsets at 0%). Always confirm 100%.

Typical use: park 6-12 months of expenses in offset. Use as the primary transaction account. Pay regular living expenses out of it. Each dollar saves rate × dollar in annual interest. At 6.4% with $50K offset = $3,200/year interest saving. The compounding effect over a 30-year loan is material. Typically reduces total interest by 4-8 years' worth of repayments.