Offset vs. redraw

Offset accounts differ from redraw facilities in a number of important ways. While they are similar in function – both are a means to store funds and reduce the amount of interest you pay – they have nuances of their own, too.

So. How are they different and which one best suits your requirements?

Offset	Redraw
Offset accounts are separate transaction accounts. The money in these offset accounts is calculated daily, but you'll only see the offset amount applied at the end of the month when your interest amount appears on your statement. An offset facility is not always available with a fixed rate loan – but don’t worry, it is with a Tiimely Own home loan.	A redraw facility allows you to access any additional payments you have made to your home loan - you can't withdraw the money you've repaid on your loan. The extra repayments can be regular payments over the minimum, or from a lump sum payment.
Money is easily accessible like it would be for any account, and typically comes with a card that you can use at ATMs , EFTPOS machines, and online shopping – it’s more convenient because you can access the money instantly vs. the delay you may experience with transferring from a redraw account.	Money is accessible via your home loan account and is typically transferred into another account (i.e. savings, everyday or offset account), so it can take a couple of days before it lands in your account.
Not always available with a fixed rate loan – but don’t worry, it is with Tiimely Home.	Additional repayments are not always allowed for fixed rate loans, or the amount is capped per annum, like Tiimely - we allow up to $20,000 in additional repayments on fixed rate loans
Protected under the Financial Claims Scheme (FCS) for up to $250,000 (note you're only protected for up to $250,000 per account holder per ADI licence holder - so anything above $250,000 per institution, is not covered under the guarantee - and wow, good on you for having some hefty savings).	The additional repayments have technically been paid to the lender so, they belong to the lender. A redraw facility is them allowing you to access the excess funds. Technically lenders can change their mind about offering this facility and sometimes without notice.
Minor catch: Unlike some other lenders, at Tiimely Home we don't build the cost of the offset account into our interest rate. You simply pay $10 per month for the feature instead.	Online redraws are typically free (manual redraws – i.e. calling up and request a withdraw process, can incur a cost).

Both can be helpful by

Reducing the amount of interest you pay on your loan (just so we’re clear).

Decreasing the amount of tax you pay, i.e. if you were earning interest in a savings account, that would be considered income and is taxable.

For investors: there may be tax implications if you decide to bring your loan balance down through extra repayments and accumulate the amount in a redraw facility. You would need to demonstrate that the use of these funds are for investment purposes to be able to claim them as tax deductions vs. funds sitting in an offset account where the ‘fund purpose’ test would not apply (because the full loan amount would be tax deductible). Head over to the ATO or speak to a registered tax adviser to find out if this applies to you.

Allowing you to build good savings habits by encouraging you to pay a little extra or putting away money (and save more while you’re at it, win-win)

Find out more

Important information about rates
*Tiimely Own products are subject to loan-to-value ratio (LVR) requirements, eligibility and credit criteria and terms and conditions. Rates apply to new Tiimely Home customers only and are subject to change without notice.

**The rates shown for products available from panel lenders via Tiimely Home brokers are current based on information from panel lenders and are subject to change without notice. The home loan with the lowest current interest rate is not necessarily the most suitable for your circumstances, you may not qualify for that particular product and the product may not include all the features relevant to you. All applications are subject to lender assessment and approval, and eligibility requirements and terms and conditions apply.

^Comparison rates are based on a loan amount of $150,000 over a 25-year term. They factor in fees associated with applying for the loan, ongoing fees and fees associated with leaving the loan. Tiimely Own fixed loans roll to a variable principal and interest rate at the end of the specified fixed term. If the interest only period is not specified, the comparison rate is calculated on a 5-year period.

WARNING: The comparison rates are true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Other important information
+Tiimely Home is known for its fast approvals for Tiimely Own products and responsive service, powered by our technology and supported by our team of experts. Application and approval times are estimates only and not guaranteed. Turnaround times are dependent on individual circumstances. Applications for a Tiimely Own loan may require an assessor to obtain more information. Assessment times for home loan applications made via Tiimely Home brokers are dependent on individual panel lenders.

The information provided does not constitute an offer of credit and does not take into account your objectives, financial situation or individual circumstances. We recommend seeking independent financial, taxation and legal advice to check how the information provided aligns with your individual circumstances.

Tiimely Home receives commissions from Tiimely Own loans and, where customers apply for a loan with the assistance of a Tiimely Home broker, from loans settled with panel lenders. Tiimely Home brokers do not receive individual commissions. More information about the credit services provided by Tiimely Home is available in the Tiimely Home Credit Guide (PDF) and Tiimely Home Broker Credit Guide (PDF).

Comparing Offset Accounts and Redraw Facilities

Both can be helpful by

Find out more

Found in:

Share:

Related content

10 Home Loan Terms You Need to Know Before Applying

Monthly, fortnightly and weekly payments – which is better?

Redraw 101: How It Works and Why It Matters