As interest rates continue to rise, many borrowers are hitting pause to reassess their home loan setup. Reviewing how your loan is structured can help you better manage repayments, depending on your individual circumstances. 

Two features often in the spotlight are offset accounts and redraw facilities. Used effectively, both can help reduce the amount of interest you pay over time, though each works a little differently. 

Offset accounts 

An offset account is a transaction or savings account linked to your home loan. The balance in this account is offset against your loan when interest is calculated. 

For example, if your loan balance is $500,000 and you have $50,000 in a 100% offset account, you’ll only be charged interest on $450,000. 

Rather than earning interest like a regular savings account, the funds in your offset work quietly in the background, reducing your loan interest. 

Key benefits: 

• Interest savings: The higher your offset balance, the less interest you’re charged.  
• Flexibility: Your money remains accessible for everyday use, including transfers and withdrawals.  
• Tax efficiency: Interest savings are generally not considered taxable income, though this can vary. It’s worth checking with a qualified tax professional.  
• Faster loan reduction: Lower interest means more of your repayments go towards the principal, potentially shortening your loan term.  
• Investor-friendly: For investment properties, using an offset can help preserve the tax deductibility of interest, even if you access the funds later.  

Potential drawbacks: 

• Fees: Some offset accounts are part of loan packages with annual costs.  
• Interest rates: Loans with offset features may carry slightly higher rates in some cases.  
• Availability: Typically offered with variable-rate loans rather than fixed-rate options.  

Redraw facilities 

A redraw facility allows you to make extra repayments on top of your minimum loan repayments. These additional payments reduce your loan balance and the interest charged. You can then access (or “redraw”) those extra funds later if needed. 

For instance, if you have a $500,000 loan and make an extra $50,000 in repayments, your balance drops to $450,000 and interest is calculated on that lower amount. 

Key benefits: 

• Interest savings: Extra repayments directly reduce your loan principal and interest costs.
• Shorter loan term: Consistently paying more than the minimum can help you pay off your loan sooner.  
• Repayment flexibility: Some lenders may allow repayment pauses or reductions if you’re ahead.  
• Built-in discipline: Funds are less accessible than in an offset, which can help curb spending.    

Possible drawbacks: 

• Access limits: Lenders may restrict how much or how often you can redraw.  
• Tax considerations for investors: Using redraw funds for personal expenses on an investment loan may affect interest deductibility. Professional advice is recommended.  
• Availability: Like offsets, redraw facilities are generally tied to variable-rate loans.  

While both options can help reduce interest costs, they come with different trade-offs and won’t suit every borrower. 

Why more Australians are refinancing 

In 2025, over 640,000 homeowners refinanced their mortgages, a 20% increase compared to the previous year. 

With multiple rate hikes, many borrowers are exploring refinancing to secure a more competitive rate or access features that could help reduce interest over time. 

Thinking about your next move? 

Whether refinancing or restructuring your loan is the right step depends on your financial position and long-term goals. If you own an investment property, tax implications also play a role, especially when comparing offset accounts and redraw facilities. 

To understand what option may suit your situation best, contact us today to speak with our team and explore your home loan options.