Home loan features
Both features can reduce home-loan interest, but they work differently and are not available on every product.
An offset is a transaction account linked to your home loan. Its balance offsets the loan balance used to calculate interest. For example, $30,000 in a full offset against a $600,000 loan means interest is calculated on $570,000 while the balance remains in the account.
Redraw lets you access additional repayments you have already made on the loan, subject to the loan terms. Those extra repayments reduce the outstanding loan balance and interest. Lenders may set minimum redraw amounts, fees or access limits, so check the product rules.
An offset account generally separates your everyday cash from the loan, while redraw puts extra cash directly into the mortgage. Offset packages can have higher fees or rates. Redraw may be simpler for disciplined savers but may not provide the same transaction access.
Compare the likely interest saving with account fees and the interest rate. For investors, the tax treatment of redraw and offset arrangements can be complex, particularly if funds are later used for private purposes. Speak with an accountant before relying on a structure for tax outcomes.