Offset Account vs Redraw Facility – A Simple Guide for First Home Buyers

💡 Saving Interest on Your Home Loan? These Two Features Can Help

When you're buying your first home, you'll hear a lot of terms thrown around two of the most common are offset account and redraw facility. They both help you save on interest, but they work in slightly different ways.

Let’s break it down.

🏦 What’s an Offset Account?

An offset account is like a regular bank account that’s linked to your home loan.

The money you keep in it offsets (reduces) the amount the bank charges interest on.

Example:

- You owe $600,000 on your loan

- You have $20,000 in your offset account

- You only pay interest on $580,000

✅ Every dollar in your offset works for you

✅ Full access – use it like your everyday bank account

✅ Save interest and reduce loan term

💳 What’s a Redraw Facility?

A redraw facility lets you access extra repayments you've made on your home loan.

So if you’ve been paying more than the minimum each month, you can 'redraw' those extra funds later if you need them.

Example:

- You’ve paid an extra $15,000 into your home loan over time

- You can access that $15,000 through your redraw facility

✅ Helps you build up a buffer

✅ Save on interest by paying down your loan sooner

🚫 Access may take a few days and some lenders charge fees

🚫 Not all loans offer redraw

⚖️ So, What’s the Difference?

Offset Account vs Redraw Facility:

Offset Account:

- Works like a bank account: ✅ Yes

- Instant access to money: ✅ Yes

- Can save interest: ✅ Yes

- Regular deposits/withdrawals: ✅ Anytime

Redraw Facility:

- Works like a bank account: ❌ No (part of your loan)

- Instant access to money: 🚫 Sometimes delayed or restricted

- Can save interest: ✅ Yes

- Regular deposits/withdrawals: 🚫 Usually limited

🧠 Which One’s Right for You?

- If you want flexible access to your money, go for an offset account

- If you’re focused on paying off your loan faster, a redraw facility can help

- Some home loans come with both, so you don’t have to choose!

✅ Let’s Find the Best Option for You

At Personalised Finance, we help first home buyers like you understand how to get the most out of your home loan features.

📞 Chat with Hendy today to see how you can save interest and own your home sooner without sacrificing access to your money.