24 Mar 2021

Offset and Redraw Accounts: What is the Difference Between the Two?

Offset and Redraw Accounts: What is the Difference Between the Two?


After obtaining a home loan, on-time monthly repayments are expected by the lender. To help homeowners pay off the mortgage quicker, financial tools exist such as the offset and redraw accounts. Each serves its own purpose. The financially-savvy can make both accounts in different circumstances work for them. Let’s look at the differences and benefits.

Offset Account

An offset account is a savings-like account that does not accrue interest. Instead, it offsets your home loan’s interest charge by the equal amount in reserve. If there is $50,000 in the account, it reduces the principal that can be charged interest by $50,000. The offset account does not lock the funds. In case of an emergency, you are free to make a withdrawal, but keep in mind it impacts the following billing cycle. An offset account’s benefit is the reduction of interest charges. Over 30 years, it can save you thousands.

There are other caveats. If you have questions, contact our team of professionals.

Redraw Account

The redraw account creates a reserve through extra repayments. The additional funds are available for property upgrades and maintenance. It is often used for rental and investment properties. This account acts like a safety net in case you cannot make a mortgage repayment. You have the ability to draw credit against the funds in the account. The benefit of the redraw account is that it creates a reserve for property maintenance emergencies.

To understand the ins and out, speak with one of our team members.

Offset and Redraw Conclusion

Lenders and financial institutions are interested in partnering with clients. Our Mortgage House team is available to further discuss the details of offset and redraw accounts. Plus, we can assess your financial goals. Then, offer viable solutions. For example, if you are in the market for a new car, we offer car loans, too. Our car loan calculator is also available to you with no strings attached.

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