Understanding home loans · Guide 01
Offset vs
redraw.
Both can help reduce interest. The real difference is where your money sits and the rules for accessing it.
The short answer
Beside your loan.
Or paid into your loan.
Offset account
An offset is a separate account linked to an eligible home loan. Its balance reduces the amount charged interest. Check whether the offset is full or partial.
Redraw facility
Redraw is a feature that may let you access extra repayments made into the loan. Your lender decides the availability, limits and conditions.
The practical differences
| The question | Offset account | Redraw facility |
|---|---|---|
| Where is the money? | In a separate account. | Already paid into the loan. |
| What happens to the debt? | The account balance offsets interest; it does not itself repay the principal. | An extra repayment reduces the loan balance. Redrawing increases it again. |
| How do I access it? | Through the linked account, subject to account terms. | Through the redraw facility, subject to lender approval and product rules. |
| What should I compare? | Offset percentage, account fees and the loan rate. | Available redraw, minimum withdrawal and any fees or restrictions. |
Picture the decision
Same numbers.
Different access.
Imagine keeping $20,000 for a future renovation. With a full offset against a $500,000 loan, the example charges interest on $480,000 while the savings stay in the separate account.
Paying the same $20,000 into the loan reduces its balance to $480,000. Getting that money back depends on the redraw terms. Decide what access you need before comparing the total cost of each product.
If the property could become an investment, discuss future use of the money with a qualified tax adviser.
A few useful answers
Questions worth asking.
Will an offset automatically lower my required repayment?
Do not assume so. An offset reduces interest charged. The scheduled repayment depends on your loan terms.
How do I know my offset account is linked correctly?
Check the link in your lender’s app, online banking or loan statements. If the account or interest benefit is unclear, ask the lender to confirm it. Check the link again when you refinance or change loan products.
Is redraw the same as a savings account?
No. It is access to extra repayments under loan conditions. Read those conditions before relying on the funds.
Keep exploring
Clarity, one choice at a time.
Your next step
A little clarity.
A better conversation.
Bring your questions. We can talk through the numbers, features and considerations that matter in your situation.
Sources & further reading
Read the underlying guidance and check the current terms of any loan you are considering.
- ASIC MoneySmart: mortgage offset accounts (opens in a new tab) ↗
- ASIC MoneySmart: choosing a home loan (opens in a new tab) ↗
General educational information only. It does not consider your personal objectives, financial situation or needs. Examples are hypothetical, are not loan offers and do not assess eligibility. Lender criteria, product terms, fees and charges apply. Seek appropriate advice for your circumstances.