Understand offset account and redraw facility

Why would you want to choose an offset account feature?

An offset account in a lot of way can work as a bank account which is linked to your loan account. Any funds in this offset account helps you reduce the interest that you have to pay on your loan. So the more you have in your offset account less interest you pay on your loan.

A redraw facility on your home loan allows you to make extra repayments towards your loan. That means you can make payments on top of your monthly repayments. These payments get pooled together and can be accessed anytime you need it.

Which one of these two features is better?

Well, both these loan features fundamentally have the same concept – to pay off your loan quicker.

So which feature to choose depends on your individual situation and requirements. If you want easy access to your funds and want an everyday account features, having an offset account linked to your loan account will give you that flexibility. If you want to make extra repayments to your loan and would like to access these extra repayments only if you need to then redraw facility can help you be more disciplined.