If you’re planning to buy your first home this spring, you’re not alone. It’s one of the busiest times in the property market, with more listings and more competition. That’s why it’s important to be well prepared.
Beyond interest rates, there are other features that can make a big difference to your loan and how much interest you pay. Two of the most common are redraw facilities and offset accounts. While they both help reduce interest, they work in slightly different ways.
Here’s a breakdown of what they mean and how to choose the option for your needs.
What is a redraw facility?
A redraw facility allows you to make extra repayments on your home loan and then access those extra funds later if you need them.
For example, if your minimum repayment is $2,000 and you pay $2,500, the extra $500 goes towards your loan. This lowers the balance and reduces the interest charged. If needed, you can request to withdraw that extra amount at a later date.
Pros:
- Lets you pay down your loan faster by making extra repayments
- Helps reduce interest over time while keeping funds available
Things to consider:
- Some lenders place limits on how much you can withdraw or how often
- Withdrawals may not be available instantly
- Fees and conditions may apply
We can help you understand which lenders offer flexible redraw options that suit your financial plans.
What is an offset account?
Pros:
- Reduces interest charged while keeping your money accessible
- Can be used for everyday banking, helping you stay organised
- May help you pay off your loan sooner
Things to consider:
- Some lenders charge higher fees for offset accounts, or have limits on how many you can open
- Not all offset accounts reduce the full loan amount – some offer only partial offset
Can You Have a Redraw and Offset Account?
Yes, some home loans offer both a redraw facility and an offset account—but not all do. It depends on the lender and the loan product. Having both can give you added flexibility, but it’s worth understanding how each one works and whether you’ll actually use both features.
For example, you might:
Use the offset account for everyday spending while keeping your savings working to reduce interest.
Make extra repayments into your loan and use the redraw facility if you need those funds down the track.
Keep in mind:
Loans with both features often come with higher fees.
Some lenders may only offer one or the other on certain products.
If you don’t plan to actively use both, you might be paying for features you don’t need.
Not sure what’s included in your loan options? We’ll help you compare and decide what’s worth having, and what’s not.
Is an Offset or Redraw Better?
Both offset accounts and redraw facilities can reduce the interest you pay on your home loan—but they suit different money habits. Understanding how you manage your finances is key to deciding which feature is more valuable for you.
When an Offset Account Is Better
An offset account acts like a high-functioning transaction account, linked to your home loan. The balance in this account reduces the interest charged on your loan, dollar-for-dollar.
Offset is usually better if:
You keep a healthy balance in your everyday account
You want 24/7 access to your money with no delays
Your income is paid into a single account and you prefer to keep things centralised
You want the flexibility to dip into funds at any time (e.g. for bills, renovations, investing)
Offset accounts can be particularly useful for dual-income households or budget-conscious borrowers who want to maximise their cash flow while still reducing loan interest.
When a Redraw Facility Is Better
A redraw facility allows you to access extra repayments you’ve made on your home loan, but it’s more restrictive. Access may take longer, limits might apply, and some lenders charge redraw fees.
Redraw may be better if:
You want to make extra repayments but don’t need regular access to them
You’re focused on paying off your loan faster and prefer fewer distractions
You’re less likely to dip into funds if they’re not instantly accessible
You don’t need the features of a full transaction account
Redraw can be ideal for disciplined savers who want to reduce interest without the temptation to spend.
So, Which One Should You Choose?
It comes down to behaviour. Offset accounts give more access and flexibility, but usually come with higher fees. Redraw facilities are simpler and may help you stay focused on reducing your loan faster, but aren’t as easy to use.
If you’re not sure what suits you, or what’s actually included in your loan, we’ll help you compare options and run the numbers.
Choosing the right loan features
If you’re just starting to explore your home loan options, it’s okay not to have all the answers. The most important thing is to choose a loan that suits how you want to manage your money.
Some loans include redraw or offset features as part of the package. Others may charge more or offer fewer benefits. We will help you make sense of your choices so you can borrow with confidence and avoid paying more than you need to.
Planning to buy this spring?
Now is the ideal time to get organised. If you’re looking at buying in the coming months and want to understand how loan features like redraw and offset accounts can help, let’s chat. We can also help you get pre-approval sorted so you’re ready when the right property comes along.
