Loan features

Offset vs redraw: what is the difference?

Compare offset accounts and redraw facilities before choosing a loan feature or reviewing your current setup.

Updated: 29 July 2026
Read time: 7 min read
Reviewed by: emoney broker team

Key checks before you decide

Reviewed by emoney broker team. Updated 29 July 2026. Sources are listed below.

Compare access, interest effect, fees, restrictions, and tax-advice cautions before choosing a feature.
Ask whether the feature works the same way across the lender options being reviewed.
Check how you would actually use spare cash after settlement or refinancing.
Get tax advice before relying on offset or redraw for investment-loan decisions.

In this guide6 sections

Offset keeps money in a linked account Redraw depends on lender rules Compare access, cost, and behaviour together Think ahead if the property use may change Use calculators with realistic inputs Ask what the feature changes in the real loan

Offset keeps money in a linked account

An offset account usually works like a linked transaction account. The money in the account can reduce the loan balance used for interest calculations, while still letting you access the money for everyday banking.

This can be useful for borrowers who keep a regular savings balance, receive salary into the account, or want fast access to money without moving it into the loan itself. The benefit depends on how much money stays in offset, how long it stays there, and whether the loan or account costs more because the feature is included.

The simple question is not whether offset sounds useful. It is whether the expected interest reduction is worth the fees, rate difference, and account behaviour for your situation.

A useful review looks at the average balance, not the highest balance. If money only sits in offset briefly before being spent, the practical benefit may be smaller than the headline feature suggests.

Confirm that the account is actually linked to the intended loan. If you refinance, switch products or change loan splits, check the link again rather than assuming the offset relationship carried across.

Feature question	Offset account	Redraw facility
Where the money sits	Usually in a separate linked transaction or offset account.	Usually as extra repayments already paid into the loan.
Everyday access	Can allow transaction-style access depending on account setup.	Access depends on lender rules, processing, limits, and loan type.
Interest effect	Can reduce the loan balance used to calculate interest while funds remain in offset.	Extra repayments can reduce interest while funds remain in the loan.
Restrictions to check	Full or partial offset, account fees, package fees, and eligible loan types.	Minimum redraw, fees, processing time, fixed-loan limits, and available amount.
Future property use	May be worth discussing if the property could become an investment.	Movement of funds can need tax-advice context if future use changes.

Check whether the offset is full or partial.
Confirm the offset is linked to the intended loan and recheck after any product change.
Compare package fees and account fees.
Check whether the linked loan rate is higher than a similar loan without offset.
Use the offset calculator with a realistic average balance.

Watch out

Redraw depends on lender rules

Redraw is different because the money usually comes from extra repayments already made into the loan. You may be able to access those extra repayments later, but the amount, timing, fees, and access method depend on the loan terms.

Some borrowers like redraw because it can support extra repayments without opening a separate offset account. The trade-off is that redraw is not the same as cash sitting in a transaction account. A lender may set limits, processing times, minimum redraw amounts, fees, or rules about fixed loans.

If the money may be needed quickly, redraw access should be checked carefully before relying on it. It is also worth checking whether automatic repayments, extra repayments, or lender rules change how much is actually available.

Ask whether redraw is available on the specific product.
Check minimum redraw amounts, fees, and processing times.
Confirm whether fixed-rate extra repayment limits apply.
Do not assume all extra repayments can be accessed immediately.

Compare access, cost, and behaviour together

Both features can reduce interest, but they suit different habits. Offset can suit borrowers who want everyday access and keep savings available. Redraw can suit borrowers who want to push extra money into the loan but still keep some access subject to rules.

A feature may sound useful but still cost more than it saves. It also loses value if the borrower keeps little money in offset or the redraw rules make access difficult.

The comparison should include the actual loan rate, ongoing fees, account fees, likely average balance, expected extra repayments, and how often you need access to the funds.

For example, a borrower who keeps a larger emergency fund may value offset access differently from a borrower whose spare cash is usually small and short-lived. The feature should match behaviour rather than simply sound appealing.

How much will usually sit in offset or redraw?
Will the loan rate or package fee change?
How quickly do you need access to the money?
Are you likely to use the account consistently?

Broker note

Think ahead if the property use may change

Future plans can change the questions to ask. If a property may later become an investment, the way extra money is managed can affect the conversation with a tax adviser and broker.

A broker can explain the loan structure and product options, while a registered tax adviser can explain the tax treatment for your circumstances. Raise a possible change in property use with both advisers before moving money or restructuring the loan.

If there is any chance of moving out, renting the property, using equity, or restructuring later, raise it before choosing between offset and redraw.

Good records also matter. If money moves between loan, redraw, offset, and transaction accounts, the borrower should be able to explain what happened before asking a tax adviser or broker to review the structure.

Tell the broker if the property may become an investment.
Ask whether loan splits or feature choices matter for future plans.
Speak with a tax adviser before relying on tax assumptions.
Keep records of how funds are moved.

Next step

Want a broker to check this against your situation?

Share the loan goal, timing and a few key details. An emoney broker can then pick up the enquiry with the relevant context.Review offset and redraw options

Example

Use calculators with realistic inputs

An offset calculator can show how an offset balance may change interest over time. It should be used as an estimate, not as proof that a specific lender product is suitable.

The result can change a lot when you adjust the average balance, rate, repayment amount, fees, and remaining term. If you only keep a low balance in the account, the saving may not justify a higher package cost.

Run the calculator with conservative inputs first, then ask a broker to compare the result with the available loan options.

Test the average balance rather than the highest balance.
Include any account or package fees.
Compare the same scenario against a lower-rate basic loan.
Check the remaining loan term and repayment setup.

Broker note

Ask what the feature changes in the real loan

The practical question is what the feature changes for rate, fees, access, flexibility, lender choice and future plans. Compare those trade-offs before switching products.

If your current loan already has offset or redraw, the review should also check whether you are using the feature enough to justify it. If you are not using it, the current loan may be carrying cost or complexity without much benefit.

For a new loan or refinance, the feature should be considered beside the whole loan structure, not separately from rate type, repayment type, fees, and policy fit.

The review should end with a practical choice: keep, remove, add, or restructure the feature.

Does the feature change the rate or annual fee?
Would a basic loan be cheaper for the same goal?
Does the lender limit redraw or extra repayments?
Would a split loan make the feature more practical?

Calculator next step

Offset account calculator

Estimate how money held in offset may reduce interest over time compared with leaving the loan unchanged.

Best for: Checking whether savings could work harder inside the loan structure.
What it calculates: Estimated interest effect from an offset balance against the home loan balance over time.

A broker still needs to compare offset fees, rates, redraw rules, split loans, cash-flow needs, and lender policy.

Open Offset account

Sources used

ASIC MoneySmart mortgage offset accounts
ASIC MoneySmartofficial sourceChecked 29 July 2026
ASIC MoneySmart choosing a home loan
ASIC MoneySmartofficial sourceChecked 29 July 2026
ASIC MoneySmart pay off your mortgage faster
ASIC MoneySmartofficial sourceChecked 29 July 2026
ASIC MoneySmart mortgage calculator
ASIC MoneySmartofficial sourceChecked 29 July 2026

General information only

This guide is general information and does not take into account your objectives, financial situation, or needs. A broker can review your circumstances before any recommendation.

Next step

Want a broker to check what applies to you?

Share the goal, timing and current loan context in Quick Check so the broker knows what needs reviewing.

Review offset and redraw options View related service