An offset account is a transaction account that is linked to your home loan that has normal transaction account functionality. The benefit is that the money in your account is offset daily against your loan balance, and this will reduce the interest charged accordingly.

A redraw facility is a feature that enables you to withdraw money you have already contributed to pay off your loan. The balance of this facility consists of whatever extra payments you have already made towards paying off your loan.

Both options are great at saving you money.

Offset accounts and a redraw facility are more common with variable loans. Mathematically they result in the same outcome, however some key things to consider:

  • Offset accounts are often seen as more convenient as your funds are fully available at all times.
  • It is important to check whether your offset account is a full 100% offset account, or whether it is a partial offset as this may influence your decision to take out a particular product.
  • Access to funds via redraw is now often instant with most lenders.
  • Some lenders have minimum redraw amounts or fees for redraw, so it is important to consider this from a convenience point of view.
  • Many investors tend to prefer an offset account for simplicity from a tax perspective, but it is important to check these potential benefits with your accountant.

Overall, we find the preference for either feature is very much a personal one. Want to know more? Contact us today