Maximise Your Savings: Offset Account vs Redraw Facility Explained

Offset Account

An offset account is a transaction account linked to your home loan, reducing the loan balance used for interest calculation. For example, with a $500,000 loan and $50,000 in your offset, interest is charged on $450,000.

Benefits:

• Interest Savings: Reduces interest by offsetting your loan balance.

• Easy Access: Functions like a normal bank account for deposits and withdrawals.

• Flexibility: Ideal for everyday banking and savings.

Top Tip: Deposit your salary into your offset account to maximise savings.

Redraw Facility

A redraw facility lets you access extra repayments made on your home loan. By paying more than the minimum, you reduce the loan principal and interest charged.

Benefits:

• Interest Savings: Lowers interest by reducing the principal.

• Loan Focus: Encourages disciplined repayment.

• Access to Extra Funds: You can withdraw extra repayments if needed.

Note: Redraws may have fees or limits depending on your lender.

Key Differences

Feature Offset Account Redraw Facility Functionality Separate transaction account linked to loan. Extra repayments made into loan Access to Funds Immediate access. May have fees, limits, or delays. Discipline: Easy access, requires saving discipline, Promotes disciplined repayment

Which is Best for You?

• Offset Account: Best if you want easy access to funds and flexibility.

• Redraw Facility: Ideal if you’re focused on paying off your loan faster and don’t need frequent access to extra funds.

Final Thoughts

Both features can help reduce your loan cost. Your choice depends on how you manage your finances and access funds. Consulting a mortgage broker can help you decide.

At Mortgage Matrix, we guide borrowers in choosing the right loan features. Whether you're a first home buyer or refinancing, we’re here to help.

Next Steps: Book a free appointment today to explore your options and start saving.

Top Tip: Review your loan regularly with a broker to ensure it meets your goals. Mortgage Matrix offers a free six-monthly review for all clients.

To learn more about refinancing options and home loan types, check out our guide on refinance loan types or compare fixed, variable, and interest-only loans.