Offset Accounts vs Redraw Facilities:What’s the Difference and Why They Matter

When it comes to managing your home loanand reducing interest, two features can make a big impact: offset accountsand redraw facilities. While they’re often spoken about together,they’re not the same thing — and understanding the difference can help you makesmarter financial decisions.

What is an Offset Account?

An offset account is a transactionaccount that's linked to your home loan. The balance in your offset accountdoesn’t earn interest — instead, it reduces the interest charged on yourmortgage.

Let’s say you have a $500,000 home loan and$50,000 in your offset account. You’ll only pay interest on $450,000. Simple.

Key Benefits of Offset Accounts:

• ✅ Reduce interest payments:     Every dollar in your offset account helps reduce your loan interest.
• ✅ Access funds anytime:     It works just like a normal bank account — withdraw or deposit whenever     you like.
• ✅ Save faster: The more     you keep in your offset, the less you pay in interest — potentially     shaving years off your loan term.
• ✅ Great for salary crediting:     Have your pay go directly into the offset account to maximise the benefit     without changing your spending habits.

What is a Redraw Facility?

A redraw facility allows you toaccess any extra repayments you’ve made on your home loan. Unlike an offsetaccount, a redraw isn't a separate bank account — it’s built into your loan.

If your minimum repayment is $2,000/monthbut you’ve been paying $2,500, that extra $500 goes toward your loan balance.Down the track, if needed, you can redraw those extra repayments.

Key Benefits of Redraw Facilities:

• ✅ Reduce interest over time:     Extra repayments directly lower your principal, reducing interest.
• ✅ Discipline around savings:     Since redraw is less accessible than an offset, it's harder to dip into —     which can be a good thing.
• ✅ Useful for emergencies or     projects: Need to fund renovations or cover unexpected expenses?     Redraw gives you access to funds without needing a separate loan.
• ✅ No separate bank account     needed: Everything stays within your home loan structure.

Offset or Redraw – Which Is Better?

The right choice depends on your financialhabits:

Final Thoughts

Both offset accounts and redraw facilitiesare excellent tools for managing your mortgage more effectively and reducingthe amount of interest you pay. Used wisely, they can bring you closer tofinancial freedom years ahead of schedule.

As a mortgage broker, I help clients everyday navigate the subtle differences between products like these. If you'reunsure what's best for your situation — or want to review your current loansetup — feel free to get in touch for a personalised chat.

Needhelp finding a home loan with the right features?

I can guide you through your options and make sure your mortgage works harderfor you.

📞 Booka call today or send a message via our contact form.