When it comes to your home loan, you’ve probably heard about offset accounts and redraw facilities. Both can help you save interest and pay off your loan faster but which one is better?

As a mortgage broker, I get this question all the time, especially from people juggling investment loans and their own home loan.

Let’s break it down.

What is an Offset Account?

An offset account is a separate transaction/savings account linked to your home loan. Every dollar in this account reduces the balance on which you pay interest.

For example:

• Loan: $500,000
• Offset account: $50,000
• You only pay interest on $450,000

You can access the money anytime with a card or transfer just like a normal bank account.

What is a Redraw Facility?

A redraw facility lets you make extra payments on your mortgage then withdraw or “redraw” those extra funds later if needed

For example:

• Loan: $500,000
• You make $50,000 in extra repayments
• Your balance drops to $450,000, so you save interest
• If you need that money back, you can withdraw it through a redraw request

It’s still your money, but access can take longer and sometimes your bank may limit how much or how often you can redraw.

Which Saves You More?

It’s a tie. Both save you the same amount of interest — it’s just about flexibility.

• Offset accounts are great if you want easy access to your money, like for bills, emergencies, or future investments.
• Redraw facilities are better if you want to be disciplined and leave the money in your loan without the temptation to spend.

Simple Example

Sarah's Situation:

• Home loan: $400,000 at 6.5% interest
• Extra money: $50,000

Option 1 - Offset Account:

• Interest charged on: $400,000 - $50,000 = $350,000
• Annual interest saving: $3,250
• Access: Immediate via debit card

Option 2 - Redraw Facility:

• Makes $50,000 extra payment
• Interest charged on: $350,000 (same as offset)
• Annual interest saving: $3,250
• Access: Usually 1-3 business days, may require approval

The Result: Both save Sarah exactly $3,250 per year in interest.

The Bottom Line

Both options are smart ways to reduce interest. If you like easy access to your funds, go with an offset account. If you want to lock your money away and stay disciplined, a redraw facility might be the way to go.

Speak to a mortgage broker to find out which setup works best for your goals.