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Offset account or redraw: which one should I use?
Bayley Clarke · Mortgage broker on the road · Last checked 16 October 2026 · 3 min read
The short answer
I'm a sucker for a good offset account. It's separate to your home loan, it doesn't play with the tax deductibility of the loan whether you live in the property or rent it out, and you can have multiple offsets so you can bucket your money.
Honestly, it comes down to your mindset. If you like seeing the balance of your home loan go down, redraw does that, as long as you know you're never going to rent the property out. If you like bucketing your money into accounts that all work for you, which a lot of my clients prefer, go offset.
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The difference in one line
An offset account is a separate account linked to your loan. Redraw is paying extra onto the home loan itself. On the interest side they do the same job: money sitting in either one reduces the amount the bank charges you interest on.
Where they differ is everything else. With an offset you still owe the full amount on the loan, but you've got the same amount of money sitting in another account that's working for you as far as saving interest. With redraw, the balance actually goes down, and getting the money back means asking the bank for it.
Why I lean offset
Because it's separate to your home loan. It doesn't matter if it's an investment property or a property you're living in, an offset doesn't play with the tax deductibility of the loan to begin with. If you ever turn your home into an investment, you haven't created a problem for yourself.
You can also have multiple offset accounts with a lot of lenders, so you can bucket your money: one for bills, one for the holiday, one for the emergency fund. Every one of them is cutting the interest on your loan while it sits there, and it's still your money the whole time.
When redraw makes sense
Redraw has its upsides. If that's all you've got on the loan, there are generally no extra fees for it. Sometimes a loan without an offset comes with a lower rate, though not always, because sometimes you get discounts on the loans with an offset attached.
And some people genuinely like seeing the balance of their home loan go down. That's where redraw is helpful, because it reduces the balance you see on the statement. If that keeps you motivated and you know you're never going to rent the property out, redraw does the job. The catch is the rent part: redrawing on a property that later becomes an investment messes with the deductibility.
The honest bit: the cheaper loan isn't always the better one
A loan without an offset can look cheaper on paper, and sometimes it is. But if there's any chance the property becomes an investment down the track, the flexibility of an offset is generally worth more than a small saving now.
The right answer is the one that matches how you actually use money. Tell me how you save and what the plan for the property is, and the choice normally makes itself.
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Offset, redraw or savings account: where should my money sit?No home loan: savings account. Home loan and cash still in savings: stop.
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The full guide: Offset, redraw and paying your loan off faster What is redraw? Should my emergency fund live in a savings account or in my offset account? What is an offset account? What is LVR, and why does everyone go on about 80% LVR?Not your question? Book a call and ask it, or call 0437 189 939.