Offset Account vs Redraw Account: What’s the Difference?

When you’re choosing a home loan, you’ll often hear about offset accounts and redraw accounts.
Both can help you save on interest and pay off your loan faster — but they work in different ways.

Offset Account

An offset account works just like an everyday bank account that’s linked to your home loan.
Any money sitting in it reduces the amount of interest you pay.

For example, if your loan is $500,000 and you’ve got $50,000 in your offset, you’ll only pay interest on $450,000.

It’s flexible and gives you instant access to your money, but offset accounts usually come with a monthly or annual fee, or are part of a package loan with yearly charges. You’re essentially paying for that convenience and flexibility.

Redraw Account

A redraw account works in a similar matter in that you can make repayments and reduce interest, but accessing the extra repayments you’ve made to your loan is more limited than an offset account. 

With a redraw account, you pay extra repayments directly into your loan and you’re able to “redraw” the money out.
However, redraws aren’t always instant — some lenders limit how often you can access your money or charge a small fee per withdrawal.

Which One’s Right for You?

Both options can help you save on interest — the right choice depends on how you like to manage your money.

If you prefer flexibility and easy access to your funds, an offset account might be best.
If you’d rather keep things simple with fewer fees, a redraw account could suit you more.

Get in touch with our team to find out which setup suits your goals best and how much you could save on your mortgage.