Redraw Facility versus Offset Account. Whilst you may be familiar with both of these terms, do you know what it really means? We explore both options and help you decide which Home Loan option suits you in the mighty battle of Redraw vs Offset!

Redraw Facility

A Redraw facility is a feature which can be activated or deactivated on your home loan, allowing you to transfer any extra payments made, over and above your minimum payment, into another account.

With the exception of only a few banks, redraw is usually only available on Variable Interest Rate loans.

Example; You’ve been paying more than your minimum mortgage repayment for the last year, or you make a lump sum deposit, and you find that you have accrued $x in ‘Available Redraw’. Using internet banking, you can transfer these funds into your transaction account to use.

Offset Account

An Offset Account is a transactional account which is linked to your home loan. The balance of your Offset Account, offsets the amount of interest that is payable on your loan. The funds in the Offset Account can be accessed at any time, using internet banking or your debit card for purchases or cash withdrawals.

With the exception of only a few banks, Offset Accounts are usually only available on Variable Rate Interest loans. Partial Offset Accounts may be offered on Fixed Rate loans, which are calculated with a smaller percentage of benefit.

Example; Your loan account is $300,000 and you have $100,000 sitting in your Offset Account. You will only pay interest on $200,000, rather than the full balance.

So, Redraw vs Offset, which one is better?

Well, both options can reduce the amount of interest you pay on your loan. The decision comes down to your preference on how you like to manage your money. Do you want to have easy access to your savings? Or, is it safer to be tucked away requiring a well-thought out internet transfer?

To discuss these options, and many more, call Ellen on 0423688756 or get in touch here.