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Redraw facility vs offset account

Redraw facilities and offset accounts let you use extra money to reduce your interest repayments and still access the cash if needed. But they're quite different features.

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  • Offset accounts. You can save money in an offset account just like a bank account, but this money reduces your loan size while it's in the account. This means you pay less interest and repay the mortgage faster.
  • Redraw facilities. If you make extra repayments into your mortgage a redraw facility allows you to pull that money out later when you need it.

Both features give you greater control over your mortgage while allowing you to save on interest.

Compare home loans with redraw facilities and offset accounts

Offset account versus redraw facility

Offset accountRedraw facility
How it worksA separate bank account attached to your home loan, the money in an offset account acts like an extra repayment but is yours to spend as you need.Any extra repayments you have made onto your home loan can be "redrawn" or removed from the loan to spend as needed.
BenefitSpend the money when you need it, but while it's in the account you're paying less interest.Extra repayments mean you pass less interest, but being able to redraw this money helps in an emergency.
DrawbacksMortgages with offset accounts tend to have slightly higher interest rates.

Unlike a savings account, money in an offset doesn't generate interest for you (but it saves you more in interest charges).

Your lender may specify a minimum amount you can redraw.

Some lenders reduce the amount of your extra repayments you can access over time.

FlexibilityOffset accounts give you more control over your money. While it's in the offset account, it's your cash (but do read the fine print on your mortgage).Extra repayments are the lender's money; they just allow you to access some of it.
AccessCard, ATM, online or bank branch, depending on the lender.Varies by lender, but usually online and sometimes via branch or ATM.
Separate account?YesNo
FeesMost lenders don't charge a fee for this feature, but there are a few loans that let you add an offset for a monthly fee (usually around $10).Some lenders charge a fee each time you redraw money from the loan.

How a redraw facility works

  • Your minimum monthly loan repayments are $500.
  • But you pay $700 each month for 6 months, which equals $1200 in extra repayments.
  • A redraw facility allows you to access that extra $1200 if you need to.

Many redraw facilities will come with additional fees for withdrawing and depositing money. There may also be restrictions on how much and how often you can redraw in any given period. Check the terms and conditions of your home loan contract for specific information about redraw restrictions.

Find home loans with no minimum redraw

How an offset account works

  • You owe $300,000 on your home loan
  • You save $10,000 in your offset account
  • Your lender only charges interest on $290,000

If you need to spend that $10,000, then you're back to $300,000 and you'll pay more interest again.

Use our offset calculator and try it for yourself.

Offset account vs redraw facility: our verdict

An offset account will give you greater flexibility and control over your cash, while offering the same benefits as redraw. The main thing is to decide what you really want from the loan.

  • For paying less interest on your mortgage: both features work fine.
  • For flexibility and control: offset accounts. An offset account gives you much more control over your money. Recently, the Commonwealth Bank adjusted its redraw rule so your extra repayments reduce over time as they're folded back into the loan. This means you can't rely on accessing all of that money. With an offset account you still can because it's entirely your money.
  • For keeping it simple: redraw facility. Redraw is a more common feature than an offset account. If your only concern is to pull out extra repayments in an emergency then redraw is probably fine.
  • For maximising investment interest deductions. You really need an offset account in this scenario.

How can I get the most of out a mortgage offset?

The trick to getting the biggest benefits from these accounts is to keep as much money in them as possible, for as long as possible.

There are a couple of ways to do this:

  • Have your wages paid directly into your offset. By doing this for at least a few days (as long as you don't withdraw it all at once) your balance will be fairly high. If you have any savings you should also think about moving them into your offset.
  • Consider making all your purchases on a credit card. By paying for all your daily transactions with a credit card, you're keeping your offset account balance as high as possible for as long as possible, because you're not using your savings to pay for anything. Instead, you simply pay off your entire credit card debt at the end of the month. The offset with credit card strategy requires discipline, because you'll face big interest charges if you don't repay your credit card on time.

Compare mortgages which have redraw facilities or offset accounts

Data indicated here is updated regularly
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
Heritage Bank Advantage Package - 1 Year Fixed (Owner Occupier, P&I) New Customers Only
2.59%
3.34%
$0
$350 p.a.
95%
Get a partial offset account and flexible repayments with this package loan.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 1 Year Fixed (Owner Occupier, P&I)
2.39%
3.85%
$0
$395 p.a.
95%
$2,000 refinance cashback
Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR ≤80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.55%
2.60%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer Discount 1 ($150k+ Owner Occupier, P&I)
2.94%
3.34%
$0
$395 p.a.
95%
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
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Data indicated here is updated regularly
$
Loan purpose
Offset account
Loan type
Repayment type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
homeloans.com.au Low Rate Home Loan with Offset - LVR 60% to 80% (Owner Occupier, P&I)
2.39%
2.41%
$0
$0 p.a.
90%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR ≤80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
2.39%
2.42%
$0
$0 p.a.
80%
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
ING Orange Advantage Loan - $500k to $1M (LVR ≤ 80% Owner Occupier, P&I)
2.54%
2.89%
$0
$299 p.a.
80%
Get a 100% offset account and rate discounts for higher borrowing amounts.
AMP Bank Professional Package Variable Rate Home Loan - $100,000 and above, LVR ≤ 80% incl. LMI (Owner Occupier, P&I)
2.59%
3.00%
$0
$349 p.a.
80%
Get a sharp rate with no application or settlement fee, a redraw facility and 100% offset account. Other fees and charges apply.
Macquarie Bank Offset Home Loan Package - LVR ≤ 80% (Owner Occupier, P&I)
2.64%
2.91%
$0
$248 p.a.
80%
Has a 100% offset account which helps you save on the amount of interest you pay on your mortgage.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.29%
2.31%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.55%
2.60%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
ING Orange Advantage Loan - $150k to $500k (LVR ≤ 80% Investor, P&I)
3.24%
3.57%
$0
$299 p.a.
80%
Investors can enjoy a 100% offset account, a redraw facility and flexible repayments.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer Discount 1 ($150k+ Owner Occupier, P&I)
2.94%
3.34%
$0
$395 p.a.
95%
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
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Home Loan Offers

Important Information*
Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

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10 Responses

  1. Default Gravatar
    GaryJuly 18, 2019

    If I get a split loan with half on a fixed rate and half on a variable rate, is there such a thing as getting an offset account linked to the variable half and a redraw facility linked to the fixed half? I’d like the ability to keep a linked offset account for my wages but still have the option of making extra repayments with a redraw facility. Is it possible to have both on a split loan?

    Thanks.

    • Avatarfinder Customer Care
      JeniJuly 18, 2019Staff

      Hi Gary,

      Thank you for getting in touch with Finder.

      It would be best to speak to your lender/bank on this matter. Please note that the split rate home loans may be an option for those who want some of the features and security which comes with a combination of variable and a fixed rate home loans. This means the flexibility of a variable rate home loan, with the security of a fixed rate home loan, which can see borrowers lower their risk when it comes to rising interest rates but not discussed on having the portion of your loan on redraw or offset.

      I hope this helps.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

  2. Default Gravatar
    MichelleApril 5, 2018

    Say I borrow $100,000 investment loan and I have say $80,000 savings. There is the offset loan which comes with higher interest rates and fees and there is redraw loan with lower interest rates and low/zero fees. From investment purposes, which one allows “greater tax benefits/deduction”? Assuming you don’t need to access the $80,000 anytime in near future. Please advise. Thanks.

    • Avatarfinder Customer Care
      MayApril 6, 2018Staff

      Hi Michelle,

      Thank you for getting in touch. Please note that finder is a comparison webs ite and general information service, so we can only offer general advice.

      As we are not tax experts, we can’t really tell which of the two allows you to get more tax benefits, but generally, this would depend on some factors. Nevertheless, you may take a look at our guides on “How tax can help your offset home loan” and “Investment property tax spreadsheet” and hope you can find it helpful. Also. I would suggest that you contact a tax agent/accountant who can best advise as they take your personal circumstance into account.

      Cheers,
      May

  3. Default Gravatar
    FionaApril 28, 2017

    Hello,

    I recently refinanced with my same lender and currently have a home loan with a debt of $92,000, and redraw funds of $162,000. I have just noticed that the bank is charging me weekly repayments on a loan amount of $254,000 (so the total amount of debt and redraw funds). I was lead to believe that my repayments would be calculated on the debt only, and not the redraw funds. Is this correct, or have I misunderstood? I am extremely concerned if I have got it wrong, as I’ve just committed to a 3 year package, which includes another 2 loans. This particular loan that I am asking about is a variable interest rate, the other 2 are fixed interest rates.

    Many thanks,
    Fiona.

    • Avatarfinder Customer Care
      DeeMay 1, 2017Staff

      Hi Fiona,

      Thanks for your question.

      After you redraw money from your home loan, the interest part of your repayments will increase because you will be paying interest on your original home loan and your redraw funds. This is true for most home loans with redraw facility.

      It is best if you review the terms and conditions of your home loan to check how much you’ll be charged for accessing your redraw funds.

      Cheers,
      Anndy

  4. Default Gravatar
    JudyApril 20, 2017

    If I have a redraw amount of say $40,000 and a mortgage of $80,000 what exactly does that mean?

    • Avatarfinder Customer Care
      DeeApril 24, 2017Staff

      Hi Judy,

      Thanks for your question.

      If you have a redraw amount of $40,000, this means that you can access that amount if you need to, although lenders only do this in the case of an emergency.

      Kindly note that a lot of the redraw facilities will come with additional fees for withdrawing and depositing money. The lenders may charge these fees straight away or they may give you a few free redraws and deposits a month. There may also be restrictions on how much and how often you can redraw in any given period. Check the terms and conditions of your home loan contract for specific information about redraw restrictions.

      Cheers,
      Anndy

  5. Default Gravatar
    liaJune 5, 2014

    My question is if one loan is 108,000 and another is 221,843.

    One house is sold for 210.00 which leaves 329843 minus 210000 plus 6270 agent fees a total of 126113. how can hat leave the bank loan of 144000?

    Which is supposed to be from a redraw amount I didn’t even know I had and I am not allowed to take off principal. Don’t understand

    • Avatarfinder Customer Care
      ShirleyJune 6, 2014Staff

      Hi Lisa,

      I’m sorry, I don’t understand what you are trying to say. Could you please give me a bit more context?

      Cheers,
      Shirley

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