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.
