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Offset vs Redraw
What is the difference between an offset account and a redraw feature of a variable loan?
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It is important to understand that both a redraw facility and an offset account allow you to use your savings to reduce the interest paid on your loan. Every cent available in either redraw or your offset account will reduce the amount of interest you’re charged. Interest is calculated daily and charged monthly from your loan account.
The differences between them are outlined below:
Whether a redraw or offset is more suitable for your needs depends on a myriad of factors, including but not limited to whether you plan to rent out the property at some point. As a mortgage broker I can help you to work out whether an offset or a redraw is the right fit for you.
What is it?
How does it reduce your interest?
How to access funds?
Is there a fee Involved?
Offset
A transaction account that is linked to your mortgage
Interest is charged on the difference between your home loan balance minus the amount in your linked offset account
Transfer extra funds from your home loan into another account via EFT
Generally yes, either an annual or monthly fee applies
Redraw
A feature of a variable rate mortgage
Having funds available in redraw reduces the balance of your home loan that interest is calculated and charged on
Access your money like any normal transaction account (e.g. debit card, EFT etc.)
Generally no via online redraw
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