Offset vs Redraw: Which Feature Is Better for Your Mortgage?

For first home buyers and homeowners in Bathurst and Lithgow, choosing the right mortgage features can have a big impact on your long-term financial strategy.  

Two commonly offered tools by Australian lenders—offset accounts and redraw facilities—can both help reduce the interest paid on your home loan. But which one is right for you? 

What Is an Offset Account? 

An offset account is a transaction account linked to your home loan. The money in this account “offsets” your loan balance when calculating interest. 

How it works: 

If you owe $500,000 on your mortgage and have $50,000 in your offset account, interest is only charged on $450,000. 

Key Benefits: 

• Reduces interest payable 

• Money is accessible any time, like a regular bank account 

• Encourages savings while lowering your loan balance 

Things to Consider: 

• Offset accounts often come with higher fees or slightly higher interest rates 

• Not all lenders offer 100% offset features 

• Requires financial discipline to maintain savings in the account 

  
  

What Is a Redraw Facility? 

A redraw facility lets you access extra repayments you've made toward your home loan. Unlike an offset account, this is not a separate bank account—it’s a feature within your loan itself. 

How it works: 

If your minimum monthly repayment is $2,000 and you pay $2,500, the extra $500 can be accessed (or redrawn) later if needed. 

Key Benefits: 

• Lowers your loan principal, reducing interest 

• May have fewer or no ongoing fees 

• Helps pay off your loan faster if you don’t withdraw the funds 

Things to Consider: 

• Some lenders limit how often or how much you can redraw 

• Redraws might take longer to process than transactions from an offset 

• Not as flexible as an offset account for day-to-day use 

Offset vs Redraw: Which One Should You Choose? 

When deciding between offset vs redraw, consider your lifestyle and financial habits: 

Feature	Offset Account	Redraw Facility
Access	Instant, flexible	May have limits or delays
Fees	May have annual/package fees	Usually fewer fees
Best For	Daily flexibility & high savings balance	Structured repayment with less temptation to spend
Tax Impact	Potential tax benefits if property is later rented	Redraws may affect tax deductibility

Offset Account is ideal if: 

You’re disciplined with money, want flexibility, and plan to use the account like a savings tool. 

Redraw Facility is ideal if: 

You want to reduce your loan faster and are less likely to need the funds regularly. 

How We Help Homeowners in Bathurst and Lithgow 

At Sparks Finance, we specialise in helping first home buyers and homeowners across Bathurst and Lithgow make smart mortgage decisions.

Whether you’re structuring your first loan or reviewing your current one, we’ll walk you through the offset vs redraw debate based on: 

• Your income and expenses 

• Future plans (e.g. renovations, investing) 

• Long-term interest savings 

• Lender product comparisons