What is redraw on a home loan?

Redraw lets you access extra repayments you've made on top of your minimum repayments. The money is paid directly onto the loan, which reduces your interest, and you can ask the bank to give it back.

Is redraw money still my money?

Not technically. Once it's paid onto the loan, it has reduced your balance, so it's the bank's money until you ask for it back.

Can the bank stop me accessing my redraw?

It's not common, but it can happen. A lender can restrict or cut off access to redraw, which is one reason some people prefer to keep savings in an offset account instead.

Does using redraw affect tax on an investment property?

It can. Paying extra onto an investment loan and then redrawing it for a personal purchase, like a car, can split the loan into a deductible and a non-deductible portion. Talk to your accountant before using redraw on an investment loan.

Is redraw or an offset account better?

Both reduce your interest in the same way. An offset is generally more flexible because the money stays yours and doesn't mess with tax deductibility, while redraw suits people who like seeing their loan balance go down.

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What is redraw?

Bayley Clarke · Mortgage broker on the road · Last checked 16 October 2026 · 4 min read

The short answer

Redraw is the bank's money. You put extra money straight onto your home loan, into the BSB and account number with the big fat minus sign, and it sits there reducing the interest the bank can charge you, the same way an offset does.

The difference is that once it's on the loan, you've paid your balance down. To get it back you have to ask the bank, pretty please, and on an investment property, pulling it back out can split the tax deductibility of the loan. That's why I generally prefer offset accounts.

The two minute version, filmed from the driver's seat. The rest of this page is the detail underneath it.

How redraw works

With redraw, you transfer extra money directly onto your home loan. Not into a separate account sitting next to it, onto the loan itself, the account with the big fat minus sign. It sits there, and it works the same way as far as how the interest is calculated.

Whatever you've paid off reduces the amount the lender can charge you interest on. So if you've got $50,000 of extra repayments sitting on a $500,000 loan, you're being charged interest on $450,000, just like you would with $50,000 in an offset. On the interest side, the two do the same job.

Why it's the bank's money until you ask

Here's the distinction. When you transfer money onto the loan, you have paid down your balance. That money is no longer yours sitting in an account. Your redraw is the bank's money until you ask for it back, and you need to ask pretty please to get it.

Some people have gripes with that, and fair enough. This doesn't really happen, but it can: the bank can cut off your access to redraw, and that limits your ability to pull out those additional repayments or the savings you've been parking against the loan. If you were counting on that money as your emergency fund, that's a real risk to think about. That's a big part of why I prefer offset accounts. The money in an offset stays yours. You're not paying down the home loan with it, so the bank can't really mess you around when you want it back.

Be careful with redraw on an investment property

This is the one that catches people. Say you've got a $500,000 investment loan and you chuck $50,000 onto it. Two years later, you pull that $50,000 back out to go and buy a car. Sounds harmless. It's not. By paying down the investment loan and then borrowing that money back out to buy something that isn't classified as deductible, you've effectively split the loan. Instead of $500,000 of deductible debt, you've now got $450,000 that's deductible and a $50,000 non-deductible purchase sitting inside the same loan. That's a mess to unpick, and it can cost you at tax time.

So you've got to be careful with redraw when there's an investment property involved. An offset account avoids the problem, because the money was never paid onto the loan in the first place. I'm not an accountant, so run your own set-up past yours.

The honest bit: redraw isn't bad, it's just less flexible

Redraw still cuts your interest, and for some people the fact that the money is a bit harder to get to is actually a feature. If you'd spend anything sitting in an everyday account, a little friction can help.

But I like offset accounts purely for the flexibility. You can get debit cards linked, you can have it as your money, and you're not exposed to the bank changing its mind about access. If you're on a loan with redraw only, it's worth knowing which one you've actually got.

Not sure whether you've got redraw or an offset?

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Next question

Offset account or redraw: which one should I use?

Both cut your interest the same way. Like watching the balance drop and you'll never rent it out?