Understanding the world of mortgages, and home loans can be tricky, especially when you're faced with terms like "offset account" and "redraw facility." Lets break down the key differences between the two.

What’s an Offset Account?

Think of an offset account as your regular savings account, but with a twist—it’s linked to your mortgage. The money you keep in this account offsets (or reduces) the amount of your home loan that’s charged interest. For example, if you have a $400,000 mortgage and $50,000 in your offset account, you’ll only pay interest on $350,000.

Why It’s Great:

• Save on Interest: The more you keep in your offset, the less interest you pay.
• Easy Access: You can use it just like any other bank account—withdraw and deposit money whenever you like.
• Tax-Free: You don’t pay tax on the interest you save.

If you’ve got some savings sitting around, an offset account is a smart way to cut down your mortgage costs.

What’s a Redraw Facility?

A redraw facility is like a little safety net. When you make extra repayments on your mortgage, you’re reducing the overall loan amount, which means you pay less interest. But if you need that extra cash later on, you can "redraw" it.

Why It’s Handy:

• Pay Less Interest: Extra repayments lower your mortgage balance and reduce interest.
• Access Extra Funds: Need the money back? You can withdraw those extra payments when necessary.
• Some Limits: Be aware that some lenders might limit how often or how much you can redraw.

A redraw facility is perfect if you’re focused on paying off your mortgage quickly but want the option to access your extra payments if needed.

So, Which is Better?

It really depends on your needs. If you like the idea of having instant access to your savings while reducing your mortgage interest, an offset account might be for you. On the other hand, if you’re keen to pay down your mortgage faster and don’t mind having a bit less flexibility, a redraw facility could be the way to go.

In short, both options can help you save on your mortgage.

Got questions? Get in touch with us today! We’re here to help you navigate your mortgage options and find the best solution for your needs.