When it comes to reducing the interest on your home loan, Offset Accounts and Redraw Facilities are two powerful tools. While both can help you save money, they operate differently—and understanding how each works is essential to making an informed decision.
What Is an Offset Account?
An Offset Account is a transaction account linked to your home loan. The money in this account offsets your loan balance, so you only pay interest on the difference between the loan and the offset balance.
Example:
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Loan balance: $600,000
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Offset account balance: $50,000
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You pay interest on $550,000, not $600,000
Benefits of an Offset Account:
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Functions like a normal bank account
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Money can be deposited and withdrawn at any time
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Reduces interest daily based on the balance
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Suitable for borrowers who want ongoing access to their funds
What Is a Redraw Facility?
A Redraw Facility allows you to withdraw any extra repayments you’ve made above your required loan repayments. It also reduces the interest on your loan, but access to your money is more limited.
Key points to consider:
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You can only redraw funds you’ve paid in excess of your scheduled repayments
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Some lenders may restrict how often or how much you can redraw
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Withdrawals may take 1–2 business days to process
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It is not designed for everyday use
Redraw works best for borrowers who are focused on long-term savings and prefer not to access the extra funds regularly.
Offset vs Redraw: Which One Should You Use?
It depends on your financial habits and goals.
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Choose an Offset Account if you want flexibility, easy access to your money, and daily interest savings.
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Choose a Redraw Facility if you’re focused on building savings over time and don’t plan to access the extra funds often.
Some borrowers choose to use both—keeping daily cash flow in the offset account and parking long-term savings in redraw.
Need Expert Advice?
Not sure which option suits your loan strategy best? Let us review your current loan structure and help you design a solution tailored to your financial goals—one that helps you save more, both now and over time.
Call/WhatsApp: +84 96 275 92 07
Email: support@sw-globalfinance.com.au