Thinking about buying your first home this spring? You’re in good company – it’s one of the busiest seasons in the property market, with plenty of listings and lots of competition. The best way to get ahead is by being prepared.
When comparing home loans, most buyers focus on interest rates. But features like redraw facilities and offset accounts can make a big difference to how much interest you pay and how quickly you can pay off your loan. While they both work to reduce interest, they do so in different ways.
Here’s a simple guide to help you understand each option.
A redraw facility lets you make extra repayments on your home loan – then access those funds later if needed.
For example, if your minimum repayment is $2,000 but you pay $2,500, that extra $500 reduces your loan balance and lowers the interest charged. If circumstances change, you may be able to withdraw the extra amount you’ve paid in.
Benefits:
Things to keep in mind:
An offset account works like a regular transaction account but is linked to your home loan. You can deposit your salary, pay bills, or use a debit card just as you would with any bank account.
The difference is that your account balance offsets your loan balance. For example, if you owe $500,000 and have $20,000 in your offset account, you’ll only pay interest on $480,000.
Benefits:
Things to keep in mind:
Every lender structures these features differently. Some include them as part of a loan package, while others charge extra or apply restrictions. The best choice depends on how you prefer to manage your money – whether you’d rather make extra repayments or keep funds flowing through your everyday account.
As your Broker, I can walk you through the differences and help you decide which option suits your lifestyle and goals.
Spring is the perfect time to get your finances in order. If you’d like to learn more about how redraw and offset accounts could work for you – or if you’re ready to get pre-approval so you can act quickly when the right property comes up – let’s talk.
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Yes, that’s right. You pay zero, zip, nada.
1st Street’s premium service comes at no cost to you! 1st Street is paid by the lender when your loan settles, however, this will not affect your interest rate or loan fees! It is often more cost-effective for a mortgage broker to process a loan rather than the lenders processing it themselves in-house. In fact, we often find that we can save you money by negotiating on your behalf.
Use our online calculators to work out how much you can borrow, loan repayments, stamp duty and lots more.
