Redraw and offset accounts can both help you pay off your home loan faster and save thousands in interest. But while they sound similar, they work in very different ways.
The right choice depends on how you manage your money and what you want your loan to do for you.
In this guide, we’ll break down how each feature works, the real differences between them, and how to decide which suits your goals. You’ll also see examples, quick comparison tables, and expert tips from the Smartfinn team to help you make an informed decision before you refinance, invest, or buy your next home.
What’s the Difference Between a Redraw and an Offset Account?
A redraw facility lets you take back the extra repayments you’ve made on your home loan. An offset account is a separate bank account linked to your loan that reduces how much interest you pay by offsetting your savings against your loan balance.
Both help you save on interest, but they work differently when it comes to access, flexibility, and cost.
With a redraw, you’re paying extra into your loan, which directly reduces your debt. You can still withdraw that money later, but the process usually takes a little longer and may have limits set by your lender.
An offset account works more like an everyday transaction account. You can use it for your income and expenses, but any money sitting in it reduces the interest charged on your loan. That means your savings work harder for you without locking them away.
Smartfinn Insight: Both redraw and offset can save you the same amount of interest if the same balance stays against your loan. The real difference is how easily you can use that money when you need it.
Offset vs Redraw: Quick Comparison Table
At first glance, redraw and offset accounts seem to do the same thing: help you save on home loan interest. But when you look closer, they differ in how accessible your money is and how each affects your loan over time.
Here’s a quick side-by-side view of the key differences:
| Feature | Offset Account | Redraw Facility |
| How interest is reduced | Money in the linked account offsets your loan balance, lowering the interest charged. | Extra repayments reduce your loan balance, which means you pay less interest. |
| Access to funds | Immediate — you can transfer or spend the money anytime. | Requires a redraw request. Some lenders have limits or delays. |
| Fees | Often available only with a home loan package that has an annual fee. | Usually included in most variable loans at no extra cost. |
| Availability | Common on variable loans, sometimes offered on fixed loans. | Common on variable loans, may be restricted on fixed loans. |
| Record keeping | Keeps your personal or investment funds separate and easy to track. | Mixing personal and investment redraws can complicate tax records. |
| Tax impact | Typically safer for investment purposes, as funds remain separate. | Using redraw for personal expenses can affect deductibility on investment loans. |
| Best for | Borrowers who want flexibility and quick access to their funds. | Borrowers who want to stay disciplined and focus on reducing their loan faster. |
Smartfinn Tip: If you like easy access and tend to keep a healthy savings balance, an offset may give you more flexibility. If you’re focused on paying down your loan and don’t need frequent access, redraw could be the better fit.
Redraw vs Offset: Which Saves More Interest?
Both offset and redraw accounts can save you the same amount of interest if the same balance sits against your loan for the same amount of time. The key difference is how you access that money and whether you’re paying extra for the feature.
Let’s look at an example.
Imagine you have a $600,000 home loan with an interest rate of 6.2%, and you consistently keep $20,000 in either your offset account or as extra repayments in your redraw facility.
| Method | Average Balance Against Loan | Estimated Annual Interest Saved |
| Offset | $20,000 | About $1,240 |
| Redraw | $20,000 | About $1,240 |
As you can see, both options deliver the same savings. The only difference is how easily you can access the money.
However, offset accounts often come with a package fee (usually around $250–$400 per year). If you don’t keep much money in your account, that cost can quickly outweigh the benefit.
Smartfinn Insight: Offset only makes sense if you maintain a consistent balance that covers the annual fee. Otherwise, a redraw facility may save you more in the long run.
Access and Flexibility Compared
The biggest practical difference between redraw and offset accounts is how quickly you can access your money.
Offset accounts give you same-day access. You can transfer, pay bills, or use a linked debit card just like any other transaction account. This makes them ideal if you like to keep your savings available for emergencies, home expenses, or investment opportunities.
Redraw facilities, on the other hand, are a little more restricted. You can access extra repayments you’ve made, but lenders may:
- Limit how often you can redraw.
- Set minimum redraw amounts.
- Delay processing by one or two business days.
- Restrict redraws on fixed-rate loans.
This means redraw works best if you prefer a “set and forget” approach — paying extra when you can, but leaving it untouched.
| Feature | Offset Account | Redraw Facility |
| Access speed | Instant, 24/7 via app or card | Requires request, may take time |
| Use for transactions | Yes | No |
| Best for | Managing cash flow or emergencies | Building long-term repayment discipline |
Smartfinn Tip: Offset accounts suit people who like control and access. Redraw suits borrowers who prefer structure and don’t want to dip into extra repayments.
Offset vs Redraw Fees and Loan Compatibility
While both redraw and offset can save you interest, they don’t always come at the same cost. Understanding the fees and product limits can make a big difference to your savings.
Offset accounts are often part of a home loan package, which usually includes other benefits like discounted interest rates or credit card offers. These packages typically come with an annual fee, usually between $250 and $400. If you keep a solid balance in your offset account, that cost is often worth it. But if your balance is low or inconsistent, the fee may outweigh the savings.
Redraw facilities are usually built into standard home loans at little to no extra cost. You won’t get all the bells and whistles of a package loan, but you’ll still benefit from reduced interest by making extra repayments.
It’s also worth noting that not all loans offer both options:
- Basic or low-rate loansmay only include redraw.
- Fixed-rate loansoften limit or remove redraw and offset access during the fixed period.
Smartfinn Insight: Offset accounts are great for flexibility, but you shouldn’t pay for features you don’t use. A Smartfinn broker can show you when an offset package is worth it — and when a simple redraw facility could save you more overall.
Rule of Thumb:
Offset can be worth it if the interest saved on your average balance is higher than the annual fee.
Offset and Redraw for Homeowners vs Property Investors
Homeowners and property investors often use these features for different reasons. While both options can reduce interest, how you use the money and how the loan is structured matter.
For Homeowners
If you live in the property, your main goal is to reduce debt faster while keeping access to your money when needed.
- Offset accountsare great for flexibility. You can keep your salary, savings, or emergency funds in the offset account while still reducing interest.
- Redraw facilitiessuit those who prefer structure. Each extra repayment directly lowers your loan balance, which helps build discipline and can reduce temptation to spend.
For Property Investors
When it comes to investment properties, things work a little differently. The goal is often tax efficiency and clear financial records.
- Offset accountsare generally preferred because they let investors keep funds separate from personal spending. You can hold rental income or savings in the offset without affecting loan deductibility.
- Redraw facilities, however, can create complications if you withdraw funds for personal use. This can change the purpose of that portion of the loan, which may affect what’s tax-deductible.
Smartfinn Tip: Using an offset account for investment properties can make it easier to manage rent, expenses, and future purchases without risking tax deductibility.
Disclaimer: This information is general in nature and does not constitute tax advice. Always speak with a qualified accountant or financial adviser before making decisions about loan structure or deductibility.
Pros and Cons of Offset vs Redraw
Both redraw and offset accounts can help you save money, but each has its own strengths and trade-offs. Here’s a quick breakdown to help you see which one aligns with how you manage your finances.
| Offset Account | Redraw Facility | |
| Pros |
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| Cons |
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Smartfinn Insight: There’s no universal “best” option — only the one that fits how you save, spend, and plan for the future.
Which Option Suits Your Borrower Type
The right choice often comes down to your habits, how you save, spend, and plan ahead. Here’s a simple way to see which option might suit you best.
| Borrower Type | Best Fit | Why It Works |
| Disciplined Saver | Redraw Facility | You prefer structure and rarely need to access extra funds. Redraw helps you stay focused on paying down your loan faster. |
| Active Money Manager | Offset Account | You like to keep savings flexible and use your account for income, bills, and expenses. Offset gives instant access while still saving on interest. |
| Investor | Offset Account | Keeps rental income, expenses, and savings separate for clean record keeping and tax efficiency. |
Smartfinn Insight: How you handle your money matters more than the feature itself. The best option is the one that helps you stay consistent and in control.
Can You Use Both a Redraw and an Offset Account?
Yes, some home loans let you use both features at the same time, and when set up correctly, this can give you the best of both worlds.
For example, you could:
- Keep your everyday funds and emergency savings in your offset account for instant access and ongoing interest savings.
- Use your redraw facility for extra repayments that you don’t plan to touch, helping reduce your loan balance faster over time.
This structure gives you flexibility for short-term needs while still helping you make steady long-term progress on your loan.
Smartfinn Insight: At Smartfinn, we often help clients combine both options, using the offset for flexibility and redraw for repayment discipline. The right mix can improve cash flow and reduce overall interest without paying for unnecessary features.
Common Mistakes Borrowers Make
Even small misunderstandings about redraw and offset accounts can cost you money or flexibility down the line. Here are some of the most common mistakes borrowers make and how to avoid them.
| Mistake | Why It Matters |
| Paying for an offset account but keeping a low balance | If you’re not holding enough savings, the annual fee may outweigh the interest saved. |
| Using redraw funds for personal spending on an investment loan | This can affect tax deductibility, as part of your loan may no longer be considered for investment use. |
| Fixing your rate and losing access to offset or redraw | Some fixed loans restrict or freeze access to these features until the fixed term ends. |
| Not reviewing your setup as your circumstances change | What works when you buy your first home might not be ideal when you refinance, renovate, or invest. |
Smartfinn Tip: The right loan setup changes as your life does. Checking in with your broker every few years can help make sure your features are still working in your favour.
Quick Decision Guide: Offset vs Redraw Summary
If you’re still unsure which option is right for you, here’s a simple way to think about it.
Choose an Offset Account if you:
- Keep a steady balance in your account each month.
- Want quick access to funds for emergencies or investments.
- Have a variable income and need flexibility.
- Own or plan to buy an investment property.
Choose a Redraw Facility if you:
- Don’t need frequent access to extra funds.
- Prefer a low-fee loan without package costs.
- Want to stay disciplined about paying off your loan faster.
- Are on a basic or fixed-rate home loan that doesn’t offer offset.
Both features can save you the same interest if you use them consistently. The difference lies in how you like to manage your money.
Smartfinn Insight: Offset and redraw aren’t about which is better; they’re about which fits your lifestyle, goals, and cash flow habits.
How Smartfinn Helps You Choose the Right Setup
Understanding how redraw and offset accounts work is the first step. Knowing how to use them strategically is where the real savings happen, and that’s where Smartfinn Advisors can help.
Our brokers specialise in structuring home loans that align with your goals, whether you want to:
- Pay off your home sooner.
- Manage cash flow more efficiently.
- Build long-term wealth through property.
We’ll compare how each feature affects your repayments, flexibility, and total interest costs.
Whether you’re looking for an investment property loan or are a first home buyer, you’ll get a clear picture of what suits your lifestyle and financial plan, not just a standard product from a single lender.
If you’d like to see how much you could save, our team can show you the numbers and explain your options in plain language.
Call us on 1300 305 101 or contact us online to compare offset and redraw options, model your savings, and find a setup that supports your financial goals.
