Redraw vs Offset

One question we get asked all the time is “what is an offset sub-account and how can I benefit from using it?
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Put simply, an offset sub-account is linked to your home loan where you can put money (e.g. from savings or your pay) and rather than earn credit interest on that money, use the money to reduce the interest payable on your home loan. Your money is at call, so you’re able to redraw it anytime you want, using your Visa Debit card attached to the account.

One question we get asked all the time is “what is an offset sub-account and how can I benefit from using it?”

Redraw vs Offset

One of the benefit of putting funds into an offset sub-account is that this amount is considered when your interest repayments are calculated. That is, when we calculate your home loan interest we reduce the amount of your home loan balance by the amount you have in your redraw offset facility. So you’ll pay less interest which could help you pay your home loan off sooner.

To give you an example: Say for example your loan balance (amount you owe us) was $400,000 and you had $40,000 in your offset. Instead of calculating interest on a home loan balance of $400,000, we’d only calculate it on a balance of $360,000 ($400,000 - $40,000). So you’d pay less interest.

The saving that you get is called an offset benefit and is subtracted off your loan amount. This will slowly reduce your loan balance which could help you to pay your home loan off sooner.

Also it’s important to note that our offset sub-account is 100% offset. That means we take into account all of your money in your redraw offset facility when we calculate your benefit. Not all lenders do this, some might only take a smaller percentage into the calculation. It is important that you consider the loss of credit interest on your money, and the percentage being offset, when looking at a loan with this facility.

We also recommend that when you are considering anything financial, that you do the calculations and get independent financial advice which is specific to your circumstances.

Get started

Our Smart Home Loan product gives you the option of an offset sub-account with a visa debit card included. Speak to a lending specialist to find out more or pre-qualify to get started.


Tags: buying property | first home buyers

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