An offset account and a redraw facility both let spare cash reduce your interest. They work differently, and for some people the difference is worth thousands of dollars.
How an offset works
An offset is a transaction account linked to your loan. If you owe $600,000 and have $40,000 in the offset, you're charged interest on $560,000. Your salary can go straight in and you spend from it as normal.
How redraw works
With redraw, you make extra repayments into the loan itself and can withdraw them later. The effect on interest is similar, but the money is technically repaid debt, and lenders can change or restrict redraw access.
The investment property trap
If you might one day move out and rent your home, keep savings in an offset rather than redraw. Money redrawn from a loan is new borrowing for tax purposes, and using it for personal expenses can reduce the interest you can claim. Speak with your accountant. Our investment loans page covers structuring in more detail.
| Feature | Offset | Redraw |
|---|---|---|
| Reduces interest | Yes | Yes |
| Everyday access | Like a bank account | Transfer from loan, may have limits |
| Better if home becomes an investment | Yes | Usually not |
| Typical cost | May need a package loan | Usually free |
Is an offset worth the fee?
If you keep a meaningful balance, often $20,000 or more, an offset usually pays for itself. With small balances, a low-fee loan with redraw can be cheaper. We compare both when structuring your home loan.
Compare loans with and without offset
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