It is important to understand what these two terms mean and how these features benefit your home loan.
Offset Account Explained
An offset account is a separate account that is linked to your home loan. You are able to put funds into this account and those funds help reduce your home loan balance and the amount of interest that you pay on your loan. To give you an example: Just say your loan balance (amount you owe) is $320,000 and you had $40,000 in your offset account. With a 100% offset, the interest on your home loan is calculated on a balance of $280,000; that is, the home loan account balance of $320,000, less the offset account balance of $40,000.
What is Redraw Facility?
A redraw facility is usually offered with variable rate home loans. The facility allows you to repay extra money off your home loan which reduces the interest payable on your home loan account. The difference with a redraw facility is that you have the ability to redraw these funds at a later date if you choose to. Some lenders charge for redraw, and others impose restrictions on your transaction access to these extra repayments.
100% Redraw Offset Facility
At loans.com.au we provide the extra convenience of a combined 100% redraw offset facility, where 100% of the funds are used to offset your loan balance, and you have full redraw access. You can transfer all surplus funds into this account, get 100% of the funds to offset your loan balance, plus full transactional access to redraw your extra repayments when you need them, at no cost.