Redraw vs offset: what first-home buyers should know

If you’re planning to buy your first home this spring, you’re not alone. It’s one of the busiest times in the property market, with more listings and more competition. That’s why it’s important to be well prepared.

Beyond interest rates, there are other features that can make a big difference to your loan and how much interest you pay. Two of the most common are redraw facilities and offset accounts.

While they both help reduce interest, they work in slightly different ways.

Here’s a breakdown of what they mean and how to choose the option for your needs.

What is a redraw facility?

A redraw facility allows you to make extra repayments on your home loan and then access those extra funds later if you need them.

For example, if your minimum repayment is $2,000 and you pay $2,500, the extra $500 goes towards your loan. This lowers the balance and reduces the interest charged. If needed, you can request to withdraw that extra amount at a later date.

Pros:

• Lets you pay down your loan faster by making extra repayments
• Helps reduce interest over time while keeping funds available

Things to consider:

• Some lenders place limits on how much you can withdraw or how often
• Withdrawals may not be available instantly
• Fees and conditions may apply

We can help you understand which lenders offer flexible redraw options that suit your financial plans.

What is an offset account?

An offset account is a transaction account linked to your home loan. It works like an everyday bank account – you can have your salary paid in, use a debit card, and pay bills directly from it.

The money in the account is “offset” against your home loan balance.
For example, if your home loan is $500,000 and you have $20,000 in your 100 per cent offset account, you are only charged interest on $480,000.

Pros:

• Reduces interest charged while keeping your money accessible
• Can be used for everyday banking, helping you stay organised
• May help you pay off your loan sooner

Things to consider:

• Some lenders charge higher fees for offset accounts, or have limits on how many you can open
• Not all offset accounts reduce the full loan amount – some offer only partial offset

As your broker, we can help you compare lenders to find an offset account that matches your spending and savings habits.

Choosing the right loan features

If you’re just starting to explore your home loan options, it’s okay not to have all the answers.
The most important thing is to choose a loan that suits how you want to manage your money.

Some loans include redraw or offset features as part of the package. Others may charge more or offer fewer benefits.

We’ll help you make sense of your choices so you can borrow with confidence and avoid paying more than you need to.

Planning to buy this spring?

Now is the ideal time to get organised. If you’re looking at buying in the coming months and want to understand how loan features like redraw and offset accounts can help, let’s chat.

We can also help you get pre-approval sorted so you’re ready when the right property comes along.