Should my savings be in an offset account or a savings account?

If you have a home loan, offset (or redraw). Money in a savings account earns less than the mortgage charges, and the interest is taxed. Money in offset reduces the loan interest instead.

What is the difference between offset and redraw?

Offset is a separate account whose balance is deducted from the loan balance for interest purposes. Redraw is extra repayments made onto the loan itself that you can withdraw later.

Is an offset account worth the fee?

For people who want multiple accounts, a debit card and full flexibility, usually yes. For someone who wants the cheapest no-frills loan and won't touch the money, redraw on a no-fee loan can be the better deal.

Why is redraw a problem if I turn my home into an investment?

Withdrawing from redraw is treated as new borrowing, and the purpose of that new borrowing affects the loan's tax treatment. Offset avoids the issue. Confirm the tax side with an accountant.

Where should a first home buyer keep their deposit before buying?

A savings account, since offset and redraw only exist once there's a loan. The First Home Super Saver scheme is another option worth asking about.

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Straight Answers · Refinancing

Offset, redraw or savings account: where should my money sit?

Bayley Clarke · Mortgage broker on the road · Last checked 1 September 2026 · 3 min read

The short answer

If you don't have a home loan, the first two aren't applicable and your money stays in the savings account. If you've got a home loan and your money is in a savings account, just stop. It needs to be in one or the other: offset or redraw.

Offset is a separate account with more flexibility. Redraw is money paid straight onto the loan that you can pull back later. Which one suits you comes down to whether you want buckets and a debit card, or the cheapest possible loan. And one warning if the property might become a rental one day.

The 90 second version. The rest of this page is the detail underneath it.

If you don't have a home loan yet

Offset and redraw only exist once there's a loan for them to work against. Until then, your savings account is the right place, and a first home buyer could also look at the First Home Super Saver scheme as a way to save, though that's a separate question to this one.

Offset: the flexible one

Offset is a separate account. It doesn't co-mingle with the loan, which matters from a tax perspective if the property ever changes purpose, and it gives you more flexibility: you can have multiple accounts to bucket your money, and spend from a debit card, while every dollar sitting in there offsets your mortgage balance.

A lot of people prefer that flexibility and are happy to pay the monthly or annual fee that comes with a loan that has it.

Redraw: the no-frills one

Others are very basic. No frills. They just want a no-annual-fee home loan where they can put their savings against the loan as redraw, pull it back out later if they need it, but mostly it just sits there reducing the interest.

Redraw is fine if that's how you're going to do it. It usually comes on cheaper loans, and for someone who doesn't need buckets or a card, that's the better deal.

The redraw warning

You've just got to be careful if you think you might turn the property into an investment in the future. Pulling money out of redraw changes what that money is, from the loan's point of view: it's new borrowing, and the purpose of new borrowing is what an accountant looks at.

I'm not an accountant, but that's what I've seen bite people. If a future rental is even a maybe, offset keeps your options clean. Get the tax treatment from your accountant, not from me.

The honest bit: 'just stop' is the whole answer for most people

The most common version of this question isn't offset versus redraw. It's someone with a home loan and a healthy savings balance earning a little interest in a separate bank, paying tax on that interest, while their mortgage charges them more on the same money. That's the one I want to interrupt.

Move it. Offset or redraw, either one. Which of the two you pick is a second-order decision. Leaving it in savings is the only wrong answer on this page.

Want to know whether your loan has the right one for how you live?

A 30 minute call. Whether your current loan gives you offset, redraw or neither, what the fee buys you, and whether switching structure is worth it. If it isn't, I'll say so.

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Next question

Why redraw doesn't work on an investment loan

The warning above, walked through with a worked example.