Offset vs Redraw Calculator
Wondering if an offset account is actually worth it? Compare the cost of a loan with an offset account against a lower-rate loan with redraw, based on your loan balance and average offset amount.
How the calculator works
This calculator compares the estimated annual cost of each loan option so you can see which structure may suit your situation. Here is the step-by-step logic.
What the numbers mean
- Estimated annual cost: The total interest plus fees for one year at the rates and balances you entered.
- Monthly difference: The annual saving divided by 12 to make it easy to picture in your budget.
- Break-even offset balance: The average offset balance you'd need so both options cost roughly the same. If this number is higher than your loan, the offset option may not reach break-even.
What is an offset account?
An offset account is a transaction account linked to your home loan. Money sitting in the offset account reduces the loan balance used to calculate interest. For example, if your loan is $600,000 and you have $30,000 in offset, you're generally only charged interest as if the loan balance was $570,000.
- Can reduce the interest you pay
- Can help pay the loan off faster if repayments stay the same
- Money usually remains accessible day-to-day
- Offset loans can have higher rates or annual package fees
What is redraw?
Redraw lets you access extra repayments you've made into your home loan, depending on the lender's rules. Instead of parking money in a separate offset account, you pay extra into the loan and may be able to redraw those funds later.
- Can be useful when the loan has a lower rate
- May suit people who don't need daily access to the money
- Some lenders have redraw limits, delays or rules
- Redraw isn't always the same as having cash in a bank account
Offset vs redraw, which one suits you?
- Better if you keep regular savings in your account
- Good if you want easy, daily access to your money
- Suits people who use multiple accounts or budgeting buckets
- May come with higher rates or annual package fees
- Better if you want a cheaper interest rate
- Good if you're disciplined with extra repayments
- May suit people with lower everyday savings balances
- Access to funds may depend on lender rules