Redraw vs offset: what first-home buyers should know

If you’re planning to buy your first home this spring, you’re not alone. It’s one of the busiest times in the property market, with more listings and more competition. That’s why it’s important to be well prepared. 

Beyond interest rates, there are other features that can make a big difference to your loan and how much interest you pay. Two of the most common are redraw facilities and offset accounts. While they both help reduce interest, they work in slightly different ways. 

Here’s a breakdown of what they mean and how to choose the option for your needs. 


What is a redraw facility?

A redraw facility allows you to make extra repayments on your home loan and then access those extra funds later if you need them. 

For example, if your minimum repayment is $2,000 and you pay $2,500, the extra $500 goes towards your loan. This lowers the balance and reduces the interest charged. If needed, you can request to withdraw that extra amount at a later date.

 

Pros: 

  • Lets you pay down your loan faster by making extra repayments
  • Helps reduce interest over time while keeping funds available


Things to consider: 

  • Some lenders place limits on how much you can withdraw or how often
  • Withdrawals may not be available instantly
  • Fees and conditions may apply

I can help you understand which lenders offer flexible redraw options that suit your financial plans. 


What is an offset account? 

An offset account is a transaction account linked to your home loan. It works like an everyday bank account – you can have your salary paid in, use a debit card, and pay bills directly from it. 

The money in the account is “offset” against your home loan balance. For example, if your home loan is $500,000 and you have $20,000 in your 100 per cent offset account, you are only charged interest on $480,000.


Pros: 

  • Reduces interest charged while keeping your money accessible
  • Can be used for everyday banking, helping you stay organised
  • May help you pay off your loan sooner 



Things to consider: 

  • Some lenders charge higher fees for offset accounts, or have limits on how many you can open
  • Not all offset accounts reduce the full loan amount – some offer only partial offset 

As your broker, I can help you compare lenders to find an offset account that matches your spending and savings habits.

 

Choosing the right loan features

If you’re just starting to explore your home loan options, it’s okay not to have all the answers. The most important thing is to choose a loan that suits how you want to manage your money. 

Some loans include redraw or offset features as part of the package. Others may charge more or offer fewer benefits. I’ll help you make sense of your choices so you can borrow with confidence and avoid paying more than you need to. 


Planning to buy this spring?

Now is the ideal time to get organised. If you’re looking at buying in the coming months and want to understand how loan features like redraw and offset accounts can help, let’s chat. I can also help you get pre-approval sorted so you’re ready when the right property comes along. 

Buying beyond your backyard – a practical guide to investing interstate

September 1, 2025
Buying an investment property in another state or territory can open the door to a range of new opportunities. From more affordable price points to higher rental yields and market diversification, there are plenty of reasons to look beyond your own backyard. But investing interstate also requires careful planning, local insight, and the right financial support.

Is now the time to refinance your home loan?

August 27, 2025
Inflation has been heading in the right direction and the Reserve Bank of Australia has cut the cash rate three times in 2025. So, is now a good time to refinance? The decision as to whether to refinance depends largely on your individual situation and goals. Here are a few key considerations to think about when deciding whether or not to refinance. The latest inflation data was promising In positive news, the consumer price index (CPI) rose by 2.1 per cent over the 12 months to the June quarter , while the trimmed mean annual inflation was 2.7 per cent to the June quarter. This is the figure the RBA pays close attention to when deciding what to do with the cash rate. With trimmed mean inflation now at its lowest since December 2021 and well within the RBA’s target band of 2-3 per cent. There is a strong case for further cash rate cuts if inflation and economic growth continue on their current path. The RBA’s latest Statement on Monetary Policy offered fresh insights into the outlook. Despite markets expecting lower rates since May, the RBA’s inflation forecast remains steady, with the trimmed mean sitting at 2.6 per cent for the next two years. Financial markets are currently pricing in a cash rate low of 2.9 per cent by December 2026 before edging back up to 3.1 per cent in 2027. If the RBA’s projections are correct, they suggest the economy can operate with a cash rate around 3 per cent and inflation will remain within their target band. Lender offers are getting sharper Given the three rate cuts so far this year, there’s a lot of competition amongst lenders to get mortgage holders through the doors. By refinancing, you may access an attractive cash back offer that helps you get ahead with your goals or secure a more competitive home loan rate. Refinancing and setting you up with a home loan with interest-saving features like a redraw facility or offset account could also help you get ahead financially. So, should I refinance now or wait it out? It’s hard to know exactly how soon the RBA will cut the cash rate again. While refinancing will depend largely on your individual situation and goals, there are mounting reasons why refinancing should be on your radar. At the very least, now is a good time to review your home loan to make sure it still measures up, particularly if you fall under any of the following categories. You’ve been with the same lender for a long time If your current home loan was locked in at the cycle’s peak, you may be paying more than is necessary on your mortgage. If you’ve had the same home loan for several years, chances are you could be getting a more suitable offer with another lender, so it’s worth exploring your options and shopping around. Your situation has changed Have your financial circumstances changed since you took out your original home loan? If so, all the more reason to consider refinancing to a home loan that marries with your current financial situation and long-term objectives. Your debt is feeling overwhelming If you’re juggling multiple debts at once, such as a personal loan and credit card debt, it may be worthwhile considering debt consolidation. With debt consolidation, you essentially roll all your debts into your home loan. It means you only have to make one repayment, making it easier to manage your debt. It’s important to remember that you may end up paying more interest over the life of the loan if you go down this road, so speak to us and we’ll crunch the numbers for you. You want to access your equity Want to make a big-ticket purchase, like buying an investment property or doing a home renovation? Refinancing to access your equity could help you achieve these kinds of goals. Like to know more? If you’re considering refinancing, reach out to us for a home loan health check. We can help you work through all the options out there and find you a home loan to suit your specific circumstances and goals. We’ll also explain any costs involved and help you weigh up whether it’s worth refinancing. Get in touch today.