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Offset

What is an offset account?

An Offset account is like a savings or a transaction account that is linked to your home loan. Some lenders allow you to have multiple offset accounts so you can easily allocate your savings.

How does it work?

The balance of this account is offset against your home loan balance daily meaning that you’re only charged interest on the difference between the home loan balance and the offset account balance.

Sounds complicated!

Offset accounts are simple, easy to manage, and easy to access. You have freedom of how much money you put in and how much you take out. They’re just a regular transaction account with a standard debit card attached and full features like Bpay and payments. Instead of earning 0.1% interest, you will save 3/4/5% on your home loan.

So what's the point?

Having an Offset will help provide an accessible buffer should your financial situation change, while giving you access to your money through a debit card.

EXAMPLE HERE

Redraw

What is a redraw facility?

A redraw facility allows you to withdraw on any additional repayments that you’ve made over the minimum repayment amount for the course of your loan. A redraw facility is typically only available with a variable rate home loan.

How does it work?

A redraw facility can be a good place to keep your savings. Instead of earning interest on your savings, you’ll be reducing the amount of interest paid on your home loan which will, more often than not, be more than what you’d earn from having the same amount in a savings account.

Why wouldn't I just use an offset?

A redraw is a good alternative to an offset if you have a variable rate home loan. Another option is to use an offset account and a redraw facility in conjunction by putting your long term savings into your redraw facility and your short term savings into your offset account.

What's the difference?

A redraw isn’t an account in the same sense that an offset is. It’s a facility attached to your home loan. This means it doesn’t have the same flexibility when it comes to accessing and using the funds but can still help you save on interest.

EXAMPLE HERE