Redraw vs Offset What’s the Difference and Which One Should You Use

Redraw vs Offset What’s the Difference and Which One Should You Use

When it comes to getting the most out of your home loan two features often come up

Offset accounts and redraw facilities

Both can help you reduce the interest you pay and both offer access to funds you’ve paid into your loan

But they work very differently

So which one is right for you

Let’s break it down

What Is a Redraw Facility

A redraw facility lets you make extra repayments onto your home loan and then withdraw that money later if needed

For example if your monthly repayment is $2,000 but you pay $2,500 that extra $500 can be redrawn in the future

It reduces your loan balance while it sits there which means you pay less interest

Pros of Redraw

• Helps reduce interest while paying down your loan faster
• Encourages savings discipline
• Often no fees to set up
• Usually available on both variable and fixed rate loans

Cons of Redraw

• Access may not be instant
• Lender may limit how much or how often you can redraw
• Your lender controls your access
• Some redraws require a formal request or take a few business days

What Is an Offset Account

An offset account is a separate transaction account linked to your home loan

The balance of the offset reduces the interest charged on your loan

So if your home loan is $500,000 and your offset has $30,000 you’re only charged interest on $470,000

Pros of Offset

• Full access to your funds at any time
• Can be used like a normal bank account
• Reduces interest while keeping your money flexible
• Great for emergency buffers or investment planning

Cons of Offset

• Some lenders charge package or account fees
• May not be available on fixed loans
• You need discipline to avoid spending the money
• Not all offset accounts are 100 percent offset

So Which One Should You Use

Choose Redraw if

• You’re focused on long term debt reduction
• You’re less likely to need the money short term
• You want fewer fees and are happy with less flexibility

Choose Offset if

• You like full access to your savings
• You’re building up an emergency fund
• You want flexibility while still saving on interest
• You’re self employed or receive irregular income

At Lendology We Help You Use Both Wisely

In many cases the best strategy is a mix

You make regular extra repayments with redraw and use offset for day to day savings or buffers

We’ll help you structure your loan to match your cash flow goals and risk tolerance

Ready to make your loan work harder for you

Book a free clarity call

We’ll explain your options and show you the real cost or benefit of switching features or lenders

Because true wellbeing begins at home