When managing your mortgage, understanding the difference between an offset account and a redraw facility can save you thousands. Both reduce your interest, but how they work (and suit your lifestyle) is different.
🏦 Offset Account – A Linked Transaction Account
- Works like a regular bank account
- Every dollar in it offsets your loan balance when calculating interest
- Eg. Loan = $500,000, Offset = $20,000 → Interest charged on $480,000
- You can access your money anytime
Great for: People with savings or regular income surpluses who want flexibility and easy access to funds.
🔁 Redraw Facility – Accessing Extra Repayments
- Any extra repayments you make beyond the minimum can be “redrawn” if needed
- Eg. If your minimum repayment is $2,000 and you pay $2,500 each month, that $500 builds redraw balance
- May have limits, delays, or fees when accessing funds
Great for: Borrowers wanting to reduce their interest but don’t need immediate access to extra funds.
🆚 Offset vs Redraw – A Quick Comparison
| Feature | Offset Account | Redraw Facility |
|---|---|---|
| Interest savings | Yes | Yes |
| Easy access to funds | Yes – like a bank account | Sometimes – with limits |
| Transactional use | Daily use possible | No – purely loan-related |
| Visibility | Shows in online banking | Shows as loan balance |
| Fees | May have ongoing fees | Usually fee-free or low |
