Offset and redraw facilities are both popular options when it comes to managing your home loan, but they serve different purposes. Here's a quick overview:
Offset Account: With an offset account, the balance of your savings or transaction account is offset against the balance of your home loan. This means you only pay interest on the difference between the two balances. For example, if you have a $300,000 mortgage and $50,000 in your offset account, you'll only pay interest on $250,000. The more money you have in your offset account, the less interest you pay on your loan which means the faster you pay off your debt. At current interest rates, you are likely to save more using an offset account, than having your savings sitting in an interest bearing account.
Redraw Facility: A redraw facility allows you to make extra repayments on your home loan and then withdraw those additional funds if needed. Essentially, it acts as a way to access any extra payments you've made towards your loan. This can be handy for emergencies or large expenses but keep in mind there may be limitations or fees associated with redraws. However, this can have ramifications on the tax deductibility of your loan.
So, which one is best for you? The best choice depends on your individual financial situation and goals. Consider speaking with us to determine which option aligns best with your needs. Remember, both offset and redraw facilities can be valuable tools in managing your home loan effectively!
