When comparing home loans in Australia, one of the most common questions borrowers ask is:
“What’s the difference between an offset account and a redraw facility?” Both features can help reduce the interest you pay on your mortgage and potentially save you thousands over the life of your loan.

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However, each works differently and offers unique benefits depending on your financial habits, goals, and property strategy. Below is a clear breakdown to help you understand how each feature works and which option may suit you best.

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What Is an Offset Account?

​An offset account is a transaction account linked to your home loan. It works just like an everyday bank account—you can deposit your salary, make payments, transfer money, and spend using a debit card.

The balance in your offset account reduces the amount of interest charged on your home loan balance.

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How an Offset Account Saves You Money

If you have:

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• $500,000 owing on your home loan

• $100,000 sitting in your offset account

 

You will only pay interest on $400,000. This can significantly reduce interest costs and help you pay off your home loan sooner.

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Benefits of an Offset Account​

✅ Full transaction capability
Spend or transfer money at any time, just like a normal bank account.

✅ Immediate access to funds
Money is available instantly—no processing delays.

✅ Powerful for interest savings
Every dollar in offset works 24/7 to reduce your home loan interest.

 

 

Who Is an Offset Account Best For?​

• Borrowers who keep a positive account balance

• Households that like financial flexibility

• Investors wanting to preserve tax deductibility (very important)

• Anyone wanting full control of their cash flow

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​​What is a Redraw Facility?

A redraw facility lets you access extra repayments you’ve made on your home loan. Instead of keeping money in a separate account, you reduce your loan balance by paying more than your minimum repayments. This extra money can later be redrawn (or borrowed back) when needed.

 

 

How Redraw Works​

• You make extra repayments

• These go directly toward your loan balance

• Your interest charged reduces

• You can access the extra amount later via redraw

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Example of a Redraw Facility?​

If you owe $500,000 on your mortgage and you’ve made $100,000 in extra repayments, your interest is charged on $400,000.

 

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Benefits of a Redraw Facility?​

✅ Great for disciplined savers
Money is tucked away within your mortgage, reducing the temptation to spend.

✅ Effective for long-term interest reduction
Extra repayments help shorten your loan term.

 

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Who Is a Redraw Facility Best For?​

• Borrowers wanting a structured way to make extra repayments

• People who prefer fewer transaction accounts

• Homeowners committed to reducing their mortgage quickly

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