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Unsure whether to choose a home loan with an offset account or redraw facility? We break down the similarities and differences.
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Redraw facilities and offset accounts are about putting your money to work. Both options have the potential to help reduce the amount of interest you pay on your home loan, either by making additional repayments or by putting additional funds into a linked account. Let's break it down:
A redraw facility allows you to make extra repayments to your home loan in addition to your minimum monthly or fortnightly repayments. The extra money you pay towards your loan can typically be taken out if you need it, for example, if an unplanned expense comes up. The idea with this option is that the extra repayments you make work to reduce the amount of interest charged on your home loan.
An offset account is a transaction account that’s linked to your home loan. Just like an everyday banking account, you can deposit (add) money and withdraw from it at will, except it has a very important feature: the money you keep in it can help reduce the interest you pay on your loan. For example, if you have a home loan of $600,000 and you have $20,000 in your offset account, you may only be charged interest on $580,000.
When comparing options, it’s important to remember that home loans differ between lenders, each with its own set of terms, conditions, limits and fees. As such, the table below is intended as a basic summary. It’s always worth checking the specific details of the home loan you’re interested in to determine which option might be best for you and where similarities and differences lie.
Feature
If you’re a disciplined saver and like the flexibility a linked transaction account affords (the ability to deposit and withdraw money at leisure), an offset account may appeal to you.
If you prefer to have money set aside that’s a bit harder to access (helping you resist the temptation of spending excess funds) then perhaps a redraw facility is well suited.
Ultimately, there’s no ‘better’ choice or universally right or wrong decision; it all comes down to your saving habits, budget and preferences.
Information is current as at the date of publication and may be subject to change. All content on the NRMA Insurance Blog is intended to be general in nature and does not constitute and is not intended to be professional advice. It does not take into account your individual objectives, financial situation or needs. References to third-party organisations, products, services or brands on the NRMA Insurance Blog are for informational purposes only and do not imply any affiliation with or endorsement by NRMA Insurance, unless expressly stated otherwise.
Bendigo and Adelaide Bank Limited (ABN 11 068 049 178, AFSL and Australian Credit Licence 237879) (“Bendigo Bank”) is the credit provider. Credit services are provided by Tiimely Pty Ltd (ABN 41 605 696 544 and Australian Credit Licence 496431) (“Tiimely”). Insurance Australia Limited trading as NRMA Insurance (ABN 11 000 016 722) (“IAL”) does not hold an Australian Credit Licence. IAL may receive a commission from Bendigo and pay a commission to Tiimely if your loan application is approved.
Terms and conditions, fees and charges apply. All information is subject to change without notice. Full details available on application. Lending criteria apply. The Offset Account is available on the Offset Home Loan only for both fixed and variable products and must be linked to an Eligible Home Loan account. The Offset Account product can only be linked to one eligible Home Loan account at any one time. Linked offset facility must be in the name of the customer name/number. Insurance Australia Limited is a member of AFCA. If you have a complaint about the home loan or offset account please refer to www.nrma.com.au/home-loans/complaints. Other fees and charges may apply and can found at the Rates & Fees page. This is general advice only and does not take into account your individual objectives, financial situation or needs (“your personal circumstances”). Before using this advice to decide whether the Offset Account product is right for you, please consider your personal circumstances and read the Offset Account Terms and Conditions to determine if this product is right for you. The Offset Account Terms and Conditions and Offset Account TMD are available at nrma.com.au/home-loans.
