TLDR
- Offset accounts and redraw facilities are common home loan features.
- Both may help reduce the interest charged on a home loan.
- They operate in different ways and may offer varying levels of access to funds.
- Available features differ between lenders and loan products.
Many home loan products include features designed to provide additional flexibility. Two commonly available features are offset accounts and redraw facilities. Understanding how these features work can help borrowers compare loan products.
What is an offset account?
An offset account is a transaction account linked to a home loan. The balance held in the account is offset against the loan balance when interest is calculated. For example, if a borrower has a loan balance of $500,000 and $20,000 in an offset account, interest may be calculated on $480,000.
What is a redraw facility?
A redraw facility allows borrowers to access additional repayments that have been made above the required minimum loan repayment amount. Access conditions and minimum redraw amounts can vary depending on the lender.
Accessing funds
Offset accounts generally allow funds to be accessed in the same way as a standard transaction account. Redraw facilities may involve different access methods, processing times, or restrictions depending on the loan product.
Comparing loan features
Not all home loans offer offset accounts or redraw facilities, and some products may offer both. Understanding how each feature operates can assist borrowers when comparing available loan options.
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