Redraw vs Offset: What's the difference?

Find out the difference between using redraw vs an offset account for your home loan

Redraw vs offset{yellow-border}

When it comes to home loans, a lot of people get confused about a redraw facility vs a mortgage offset account. You might even think they’re the same. While on the surface they sound similar, dig a little deeper and you’ll discover they’re quite different. And that can make a big difference to how you use your money. So if you’re weighing up your options about redraw vs offset and you’re not sure which one is best for you, we can help.

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Redraw Facility{yellow-border}

With a redraw feature, you can make additional repayments into your home loan (above the minimum repayment amount), which reduces the balance owing on your home loan. That means you’ll be paying less interest on your home loan and could pay down your home loan sooner.

It’s handy because on all BOQ variable rate loans, you can withdraw the additional repayments made at any time ($100 minimum) if you need access to those funds. So if circumstances change and you need to access the money you’ve used on extra repayments, you can.

Just remember, this will increase the balance owing on your home loan by the amount withdrawn and your interest costs will also adjust accordingly.

Learn about redraw{icon-button}

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Offset Account{yellow-border}

A mortgage offset account is an everyday transaction account that’s linked directly to your home loan.

The benefit of an offset account is that the daily account balance (at the end of day) is subtracted from your home loan balance before interest is calculated. Which means you can reduce the amount of interest you pay, instead paying more off your balance – helping you pay off your mortgage even faster. The more you hold in your offset account, the less interest you pay on your home loan. That’s why some people often transfer their salary and other savings into a mortgage offset account.

It works exactly like a normal transaction account, so it’s great for everyday banking. There’s no account maintenance fee, unlimited transactions and you get a linked BOQ Visa Debit Card.

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What's the difference?{yellow-border}

When it comes to an offset account or using redraw, there are some similarities and some differences.

Both features can help you reduce your interest costs and pay down your home loan sooner but they do this in different ways. The offset feature applies to a separate account where you may have money regularly coming in and out. The redraw feature applies to variable rate loans, where you can withdraw additional repayments made (above the minimum repayment amount) when you need to.
There could also be different tax implications when using either feature (particularly for investment properties) if you are seeking to make the interest charged on your loan tax deductible.

Just remember, when considering redraw vs offset, not everyone’s situation is the same and what’s suitable for one person may not be suitable for another. So, it’s important to consider your own individual situation.

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