Offset Account vs Redraw Calculator

An offset account is a transaction account linked to your home loan. The balance sitting in it is offset against your loan balance when interest is calculated, so a $30,000 offset balance against a $500,000 loan means interest is generally charged on about $470,000 for as long as that money stays there. The money remains yours to use.

Most lenders calculate interest daily and charge it monthly. That means the offset benefit reflects what's actually in the account each day — your pay landing on the 15th helps until it's spent. This is why the useful figure isn't today's balance, it's your average balance across the year.

As a rough guide, the annual saving is your average offset balance multiplied by your interest rate. At a 6% rate, $50,000 held in offset saves in the order of $3,000 of interest a year — and because that interest never compounds, the effect on your payoff date is larger again. The calculator on this page models it properly against your own balance and remaining term.

It depends on how much you realistically keep in it and what the offset loan costs compared with a basic loan. If an offset package costs 0.20% p.a. more plus a $395 annual fee, you need a meaningful average balance before you're in front. That's what the break-even figure in the calculator is for.

There's no single answer, but the break-even number is a useful floor: below it, the feature is costing more than it's saving. Many households also keep a buffer there deliberately for flexibility, which has value beyond the interest maths.

Redraw lets you access extra repayments you've already made above your minimum. Those payments reduce your loan balance, and the lender lets you take some of that money back out later — subject to the product's rules, minimum amounts and any limits or fees.

Yes. Money paid ahead reduces the balance interest is charged on, in a similar way to an offset balance. The financial difference between the two structures usually comes down to the rate and fees, not the interest mechanism.

Mainly where the money sits and how easily you can get to it. Offset money sits in your own transaction account beside the loan; redraw money is already inside the loan. Access, fees, pricing and lender conditions differ, and so can the tax position if the property later becomes an investment.

Neither is universally better. Offset tends to suit people holding larger balances who want everyday access; a basic loan with redraw can win when the balance held is modest and the cheaper rate and nil annual fee outweigh the flexibility.

Often yes — many loans offer both, so the real question isn't which feature to pick but whether the package pricing is justified by how you'll use them. Availability still varies by lender and loan type.

Frequently, yes. Offset is usually attached to a packaged or feature-rich loan, which can carry an annual fee and slightly higher pricing than a no-frills product. Whether that's expensive depends entirely on the balance you keep in it.

Usually not. Your minimum repayment generally stays the same and more of each payment goes to principal instead of interest, so the loan clears sooner. Some lenders recalculate repayments periodically — worth checking on your specific product.

The offset account belongs to that loan with that lender, so refinancing means the funds move to the new structure. Whether the new loan offers an equivalent 100% offset, and what it costs, is part of what should be compared before you switch.

It can. Redrawing money for a purpose unrelated to the property may change how part of the borrowing is treated for tax, and this catches people out when a home later becomes a rental. Circumstances differ — get advice from your accountant or a registered tax adviser before relying on any particular treatment.