Offset vs Redraw — Which Is Right for You?
They save you the same interest. The difference is how you access your money, how it's taxed, and what it costs. Let's find your fit.
Your Loan
Your Spare Cash
Funds you'd keep against the loan — the amount you'd either park in an offset or have already paid ahead and could redraw.
Whether this sits in an offset or as redraw, it reduces the interest you're charged in exactly the same way — but the benefit shows up differently. Here's what each looks like:
Same Interest Saved, Two Different 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/month · ~$109,545 over the loan
Your balance drops, so the lender lowers your minimum repayment. You free up cash flow now.
Loan balance over time
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.
Same interest, different outcome. Park $50,000 either way and you're charged the same interest right now. The difference is what happens next: an offset keeps your repayment steady and gets you debt-free sooner; redraw lowers your balance so your repayment drops and frees up cash flow. Keep paying the original amount into redraw and the two end up identical — the choice is about what you want the money to do for you.
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. That's a conversation worth having.
Book a CallSide-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 or freeze |
| 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
- Offset accounts often sit on a package with an annual fee — only worth it if your parked balance is meaningful.
- Not all lenders offer 100% offset, and few offer multiple offsets.
- Rarely available on fixed-rate loans.
Redraw — watch-outs
- Lenders can change redraw terms, set minimums, or freeze access — it's not guaranteed like cash in an offset.
- Once you redraw for personal use on an investment loan, you can permanently reduce your deductible balance.
- Some loans limit how often or how much you can redraw.
Not sure which fits? Let's work it out together.
Structure is where good loans are made or lost. Speak with an Alcove lending adviser about the right setup for your circumstances.
Book a Call