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Offset vs redraw: What’s the difference?

Money.com.au asks us about the difference between offset and redraw.


Offset vs redraw: What’s the difference?

An offset account is a transaction account that’s linked to your home loan. It saves you interest by reducing the balance of your home loan that interest is charged on. Redraw is a feature that allows you to withdraw money from your home loan if you have made extra payments.

Both an offset account and a redraw facility help you save money by reducing your home loan balance for the purpose of paying interest.

  • With a redraw facility, you save on interest directly because the extra payments you have made (but can still ’redraw’ if you need to) actually reduce your home loan balance.

  • An offset account indirectly saves you interest because the lender calculates your home loan interest based on your home loan balance, minus the balance of the linked offset account.






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