Offset, redraw and home loan management
Make your mortgage work harder — without losing sight of access and flexibility.
Offset accounts and redraw facilities can both reduce the interest charged on a home loan, but they work differently. The right feature depends on how you use your money, the loan product and your future plans.
01
What is an offset account?
An offset is a transaction account linked to your home loan. Its balance reduces the amount on which loan interest is calculated. For example, with a $500,000 loan and $50,000 in offset, interest is generally calculated on $450,000 while that balance remains.
Offset accounts can provide everyday access through normal banking facilities. Some lenders permit multiple offsets for budgeting, while others limit eligibility or charge package fees.
02
What is a redraw facility?
Redraw provides access to eligible extra repayments made above the required minimum. Those extra repayments reduce the loan balance while they remain in the loan. Access rules, minimum redraw amounts and availability can vary by lender and product.
Offset
- Separate transaction account
- Usually immediate everyday access
- May have package or account fees
- Can be useful where future investment use is contemplated
Redraw
- Extra repayments held in the loan
- Access subject to lender rules
- Usually not designed for daily spending
- Redrawing for a different purpose may have tax implications
03
Use extra repayments carefully
Extra repayments are not always treated as the next scheduled repayment. Keep enough money in the nominated repayment account to cover the regular debit. Before redrawing, check that you are not withdrawing an amount needed to satisfy the current repayment period.
FAQ
Questions people often ask
Does an offset reduce my loan balance?
No. The offset balance generally reduces the amount used to calculate interest, while the contractual loan balance remains unchanged.
Is money in redraw guaranteed to remain available?
Access is subject to the lender’s product terms and policies. Check the applicable conditions before relying on redraw as your only emergency fund.
Can I have both offset and redraw?
Some loan products offer both. Availability, fees and interest rates should be compared as part of the overall loan cost.
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