Offset vs redraw, side by side.
On the maths, they're the same. Park the same money against your loan and you'll be charged the same interest either way. The difference is what happens next — how you access the money, how it's taxed, what it costs in fees, and whether your repayment stays put or drops.
This page is a quick tour of both. Move the numbers, see the outcomes, then answer five short questions and we'll suggest which structure looks like the better fit.
"Same interest saved. The choice is what you want the money to do for you."
Your loan
Your spare cash
Funds you'd keep against the loan — what you'd either park in an offset, or have already paid ahead and could redraw.
Same interest saved, two outcomes
Same repayment, paid off sooner
- Monthly repayment
- $3,651 (unchanged)
- Interest portion this month
- $3,070 → $2,814
- Extra now going to principal
- +$256/month
- Loan paid off
- ~4y 9m sooner
- Total interest saved
- $210,871
Your repayment doesn't change — but more of it knocks down the loan. You get ahead.
Lower balance, lower repayment
- Loan balance reduced to
- $550,000
- New minimum repayment
- $3,347 (down $304)
- Cash freed up each month
- +$304/month
- Loan term
- Unchanged
- Cash flow freed up
- $304/mo · ~$109,545 total
Your balance drops, so the lender lowers your minimum repayment. You free up cash flow now.
Offset vs Redraw vs Baseline
Offset keeps the contracted repayment, so its balance line crosses zero earlier. Redraw starts from a lower balance but the smaller minimum repayment means it runs the full term.
Find your fit
Five quick questions. Your recommendation updates as you answer.
Could this property ever become an investment (rented out)?
Do you want instant, everyday access to this money (card, transfers)?
Are you worried you'll spend the money if it's too easy to reach?
Is the offset on a package with a higher annual/ongoing fee?
Is your loan (or this portion) on a fixed rate?
Toggle the questions to see your recommendation.
This is general guidance — the right structure depends on your full situation.
Side-by-side comparison
| Offset account | Redraw facility | |
|---|---|---|
| Interest charged | Same — calculated on balance minus offset | Same — extra repayments reduce the balance |
| What happens to your repayment | Stays the same | Drops (lender recalculates on lower balance) |
| How the saving shows up | Loan paid off sooner | Cash flow freed up now |
| Access to funds | Instant; works like a normal bank account | Often slower; may need a request; lender can restrict |
| Tax / deductibility | Cleaner if the property becomes an investment | Redrawing can compromise deductibility |
| Discipline | Very easy to spend | Built-in friction |
| Fees | Often on a package with an annual fee | Usually no extra fee |
| Availability on fixed loans | Rarely offered | Sometimes, but with caps |
| Number of accounts | Some lenders allow multiple offsets | Single facility per loan split |
Offset — watch-outs
- Annual fee — Often sits on a package with an annual fee — only worth it if your parked balance is meaningful.
- Lender quirks — Not all lenders offer 100% offset, and few offer multiple offsets.
- Fixed loans — Rarely available on fixed-rate loans.
Redraw — watch-outs
- Not guaranteed — Lenders can change terms, set minimums, or freeze access — it's not the same as cash in an offset.
- Tax — Redrawing for personal use on an investment loan can permanently reduce your deductible balance.
- Limits — Some loans cap how often or how much you can redraw.
General disclaimer: This explainer provides estimates only and does not constitute financial or credit advice. Results assume principal and interest repayments and that your parked balance stays in place for the life of the loan. Tax treatment depends on your individual circumstances — seek advice from your accountant. Actual outcomes vary by lender terms, fees and policies.
Alcove Capital Partners — Authorised Credit Representative (ASIC No. 545264). Credit advice by Canopy Private Pty Ltd, Australian Credit Licence 558709.