Redraw vs Offset: What Home Buyers Should Know - Sept 2025

Redraw vs Offset: What Home Buyers Should Know

By Krishna Strickland - Mortgage and Finance Broker

If you’re planning to buy your first home or upgrade this spring, you’re not alone. It’s one of the busiest times of year in the Australian property market, with more homes hitting the market and plenty of competition from other buyers.

That's why it's well worth being prepared. As well as comparing rates of interest, there are some other things about a home loan that can have a huge bearing on the amount of interest you'll pay and how quickly you can pay off your mortgage.

Two of the most widespread and often confusing, are redraw facilities and offset accounts. Both can reduce interest, but in slightly different ways. Let's break them down.

What Is a Redraw Facility?

A redraw facility lets you make additional payments against your home loan and then redraw on those extra funds later if you need to.

Example: If your minimum payment is $2,000 and you pay $2,500, the $500 difference goes directly to paying down your loan. That reduces the amount owed, so less interest accrues. If you need to, you can take out that extra $500 later from your loan account (if your lender allows).

Pros:

Saves you money by paying off your loan faster by chipping away at the principal

Saves you money in the long term by paying less interest

Leaves your money available if you have to draw on it in a hurry

Things to remember:

Some lenders have conditions surrounding how much or how often you can redraw

Redrawing your money might not always be instant

Redrawing may not be allowed on a fixed term

There may be charges and terms involved

As your mortgage broker, I'll help you find lenders with redraw facilities that align with your real money goals.

What Is an Offset Account?

An offset account is a type of transaction account separate to your home loan account. It works just like a regular day-to-day bank account, you can have your wages transferred in, use a debit card and pay bills out of it. 

The money held in the offset account is "offset" against the loan, which reduces the amount of interest charged.

Tip: If your loan's $500,000 and you've got $20,000 offset, you only pay interest on $480,000.

Pros:

Saves the interest you pay without keeping your money locked away

Works like a day-to-day account to manage income and expenses

Will help you pay out your loan sooner

Things to remember:

Some lenders charge more for offset accounts

Not all offset accounts are 100% offset (for example against a fixed loan term)

I can help you shop around to find an offset account that meets your lifestyle, spendings and saving habits.

Which One's For You?

There isn't one that is suitable product for everyone. Some home loans come with redraw and offset facilities as standard, while some may have a redraw only.

The best choice for you will rely on how you like to handle your money and how much money you can save.

If you're responsible with your savings and require flexibility, an offset account might be for you.

If you like making additional repayments but don't anticipate needing to draw on them on a regular basis, a redraw facility might be the more intelligent option.

If you're an Australian first-home buyer, it's time to prepare. With the right loan features, you can save thousands of dollars in interest and own your home sooner.

I can help you with:

• Lender and product comparisons

• Explaining redraw and offset accounts in plain English

• Preparing you so you can be ready to make an offer on your ideal property when it comes up

Need to chat to see what will work for you? Reach out here and I'll get you ahead of the rest before the spring rush for houses begins.