Offset Account vs Redraw: Which Is Better for You?
Understanding the difference between offset accounts and redraw facilities can save you thousands in interest.
Raj Bhangu
Principal Mortgage Broker
Key Takeaways
- 1Offset account: savings balance reduces interest on mortgage - ideal for investors and those with large savings
- 2Redraw facility: access extra repayments made above minimum - lower fees but less flexible
- 3Choose offset for daily transaction access and investment loans; choose redraw for lower fees
Both offset accounts and redraw facilities can help you pay off your mortgage faster, but they work differently.
What Is an Offset Account?
An offset account is a transaction account linked to your mortgage. The balance reduces the interest you pay. Example: $500,000 mortgage with $50,000 offset = interest on $450,000.
What Is a Redraw Facility?
A redraw facility allows you to access extra repayments you've made above your minimum. Example: Paid $20,000 extra? You can redraw that $20,000 if needed.
Which Should You Choose?
- Choose offset if: You have an investment loan, large savings, or want daily transaction access
- Choose redraw if: You want to minimize fees or only need occasional access to funds
Talk to our brokers about finding loans with the right features for your situation.
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Raj Bhangu
Principal Mortgage Broker
Expert mortgage broker helping Australians achieve their property dreams with personalized home loan solutions.
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As a mortgage broker, iSmart Finance receives commissions from lenders when we successfully arrange a home loan. This does not affect the interest rate or fees you pay. Our service is free for you, and we're committed to finding the best loan for your needs.
About iSmart Finance
iSmart Finance Group ACN 608 986 554 is Credit Representative 481761 of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). We are members of the Finance Brokers Association of Australia (FBAA) and comply with the National Consumer Credit Protection Act 2009.
Our content is based on industry expertise, regulatory guidelines from ASIC and APRA, and data from the Reserve Bank of Australia. All information is current as of the publication date and subject to change.
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