Redraw and offset facilities allow borrowers to reduce the interest cost on their home loans by making additional repayments or using their savings. These funds can be accessed if required. Although they perform the same function, there is a difference between a redraw facility and an offset account.
A redraw facility is part of your home loan and any extra monies deposited to your home loan above the minimum repayments reduce your loan balance. These extra funds are assigned as redraw or available funds if required.
An offset account is separate to your home loan. It is a savings or transaction account. Some offset accounts earn interest similar to a standard savings account but the interest is credited to your home loan instead of being paid or added to your savings account.
100% offset accounts are more attractive and the interest you earn is equivalent to the rate on your home loan. With offset accounts you have greater accessibility to your funds. You can access your money through online banking, ATM, and EFTPOS.
To find out more about redraw and offset facilities contact Keypoint now to discuss your options.
Pros
The following are advantages related to most redraw and offset facilities:
- Allow you to save interest costs and subsequently can reduce the term of your home loan.
- You can access some or all of these additional funds if required.
Cons
The following are disadvantages related to most redraw and offset facilities:
- Fees can be charged to access your money. Depending on your type of loan facility this can be expensive for redraw facilities.
- Some lenders have minimum deposit and withdrawal amounts, especially on redraw facilities.
- Most lenders don’t allow access to your funds in a redraw facility during the fixed term of your loan. Also, offset facilities may not be allowed for fixed rate loans.