Offset Account vs. Redraw Facility: Choosing What’s Best for You

July 27, 2023

In the realm of home loans, borrowers are often presented with various financial options that can help them save money and manage their repayments more effectively.

House with coins depicting saving money and home loans

When you take out a home loan, you have a few different options when it comes to managing your finances. Two popular choices are the Redraw Facility and the Offset Account. Both of these options can help you save money on interest, but they work in different ways.


Offset Account

An offset account operates as a linked savings account to your home loan. The account’s balance is used to offset the outstanding amount on your home loan, resulting in reduced interest payments. For instance, if you have a $750,000 home loan and $50,000 in your offset account, you will only pay interest on $700,000.

The greatest advantage of an offset account lies in its ability to act like a substantial “discount” on your home loan interest. The more money you keep in your offset account, the greater the discount, leading to lower overall interest payments. Additionally, an offset account offers the flexibility of a regular savings account, enabling you to make withdrawals, transfers, and payments whenever needed.


Reduce interest repayments: By maintaining a higher balance in your offset account, you can significantly decrease the amount of interest you pay over the life of your loan.

Make your money work for you: An offset account allows you to simultaneously save money and offset interest, providing a unique opportunity to put your funds to good use.


Fees for an offset account: When considering an offset account, it’s important to be aware that there might be fees associated with its setup and maintenance.

At Rate Money, we understand the significance of providing tailored solutions for our customers’ unique needs. That’s why we offer a diverse selection of home loan options, some of which come without incurring any offset account fees. This way, you can choose the option that best aligns with your financial preferences and enjoy the benefits of an offset account without any additional costs.

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Redraw Facility

A redraw facility, on the other hand, empowers borrowers to make extra repayments in addition to their regular loan repayments. These additional funds can be “redrawn” or accessed if needed for purposes like home renovations or unforeseen expenses.

The money held in the redraw facility counts against the balance of your home loan, leading to reduced interest payments. Effectively, it acts as a pool of funds sitting in your home loan account, on top of the balance. However, it’s crucial to recognise that regular repayments will gradually reduce the extra funds in the facility over time.


Take out extra repayments, increase cash flow in troubling times: During challenging financial periods, the redraw facility becomes an invaluable resource, offering easy access to additional funds to meet your liquidity needs.

At Rate Money, we take pride in providing a diverse and flexible range of home loan solutions, with a generous redraw limit of up to $20,000 per annum across majority of our products. Should you require a higher amount to be redrawn, our dedicated customer service team is readily available to assist you in processing your request promptly and efficiently.

Redraw encourages extra repayments and lowers interest: Knowing that you can access the funds in times of need may motivate borrowers to make more frequent extra repayments, thus further reducing their overall interest burden.


Redraw fee: Just like the offset account, the redraw facility may come with associated fees that warrant careful consideration before making a decision. Understanding these costs is crucial to making an informed choice that aligns with your financial goals.

At Rate Money, we prioritise our customers’ needs and offer a wide range of features within our home loan products. We take pride in providing a customer-centric approach, which is why we have chosen not to charge a redraw fee across various products. This ensures that you can access your funds when needed without any additional burden, enhancing the flexibility and convenience of our offerings.

Limit to the amount that can be withdrawn: Lenders often enforce certain restrictions on the maximum redraw amount allowed at any given time. Being aware of these limitations is vital to prevent unexpected surprises when you require access to your funds.

However, with Rate Money, we take pride in offering a more generous option. Across our diverse range of Home Loan products, we empower you to withdraw up to $20,000 per annum, providing you with greater flexibility and peace of mind during challenging financial situations.

bar graph depciting the difference between rate money tax debt repayment and the ATO tax debt repayments


In conclusion, both the offset account and redraw facility offer valuable advantages for homeowners aiming to enhance their mortgage management. For those seeking to proactively reduce interest payments and gain flexibility, an offset account stands as an excellent choice, leading to substantial interest savings. On the other hand, a redraw facility provides an added layer of financial security by granting access to extra repayments during times of necessity.

Reach out to our team of Rate Money Home Loan Specialists today, and let us guide you towards the optimal solution when searching for a Home Loan. We are committed to helping you make the right decision that aligns with your financial goals and secure a brighter future for your homeownership journey.

Talk to us today about your home loan needs.