10 Expert-Backed Ways to Pay Off Mortgage Faster

What Is an Offset Account?

An offset account is a bank account linked to your home loan. It works by “offsetting” your loan balance with the money you keep in the account. Instead of earning interest like a savings account, your offset reduces the interest charged on your home loan.

How It Works

Your home loan is $500,000; you keep $50,000 in your offset account. Your lender will only charge interest on $450,000, not the full $500,000.

The more money you keep in your offset account, the more you reduce your interest since mortgage interest is calculated daily on the reduced balance. For instance, $10,000 kept in offset over one year at 6% interest saves you around $600.

Benefits of an Offset Account

• Immediate Access: It functions like a regular transaction account. You can deposit your salary, pay bills, or transfer funds anytime without affecting your home loan setup.
• Daily Interest Savings: Unlike redraw facilities (which reduce the loan balance when you repay), offset accounts reduce the interest-bearing balance without paying the loan principal.
• No Withdrawal Restrictions: Unlike redraws, which some lenders restrict on fixed loans, you can withdraw from your offset anytime.
• Great for High-Income Earners and Investors: Offset accounts provide flexibility without altering your loan structure, which can help maintain tax deductibility on investment loans (essential for property investors).

What Is a Redraw Facility?

A redraw facility allows you to access any extra repayments you’ve made on your home loan above your required minimum. It’s built into your loan account and helps you reduce your interest over time by paying off more of your loan principal earlier.

How It Works

Your minimum repayment is $2,000 per month, but you’ve been paying $2,500. After one year, you’ll have paid $6,000 extra into your home loan. That additional amount reduces your loan balance and interest charged, and you can redraw that money if needed.

This differs from an offset account, where your money sits outside the loan. In a redraw, your extra payments go into the loan and lower the principal.

Benefits of a Redraw Facility

• Reduces Loan Principal: Every extra dollar you pay directly reduces the principal, leading to lower long-term interest and faster debt reduction.
• Access to Extra Funds: If you need those extra payments back later for renovations, a car, or an emergency, you can usually access them via online banking or by contacting your lender.
• Encourages Discipline: Since redraws aren’t as easily accessible as offset accounts. Redraws require extra steps to access, which discourages frequent withdrawals and promotes more disciplined debt reduction.
• Fewer Fees: Redraw facilities are often included at no extra cost, especially on basic home loan products.

Important Considerations

• Access Limitations: Some banks restrict redraw on fixed-rate loans or charge fees for branch/manual redraws. Redraw may also be frozen during settlement or refinance.
• Tax Implications for Investors: Redrawing funds from an investment loan for personal use could jeopardise tax deductibility, something offset accounts avoid.
• Lender Variability: Each bank sets its own rules. That’s why a broker can help you choose a product that gives you freedom without surprises.

Offset vs Redraw: Key Differences

While both features can help you reduce the interest on your home loan, they’re structured differently, and the right choice depends on how you manage your money.

Here’s a side-by-side breakdown to help you see the key differences at a glance:

Summary

• Use an offset account if you want day-to-day flexibility, easy access, or if you’re an investor.
• Use a redraw facility if you’re focused on loan reduction and don’t need to touch your extra payments often.

At Stryve Finance, we help you strategically combine both when possible because saving on interest shouldn’t mean sacrificing flexibility.

Which Is Right for You?

Both offset accounts and redraw facilities can save you money, but how you use them and what you need from your home loan will determine which is better for you.

Let’s look at a few common borrower profiles:

1. First Home Buyers
   Best option: Redraw Facility

   You’re likely focused on paying down your loan faster and building equity. As a first home buyer, the redraw facility helps enforce discipline by locking away extra repayments while offering access if needed.

   Stryve Tip: Make sure your lender allows easy online access with no fees.

2. Property Investors
   Best option: Offset Account

   Offset accounts are ideal for investment home loans because they help reduce interest while maintaining the full loan balance, a crucial factor for maximising tax deductions on investment properties.

   Stryve Tip: Redrawing from an investment loan for personal use may void tax deductibility.

3. Refinancers or Upgraders
   Best option: Offset or Both

   If you’re refinancing or upsizing, flexibility is key. An offset account gives you quick access to savings during transition periods, while a redraw can help reduce long-term interest if you’re building equity fast.

   Stryve Tip: We help you structure a split loan with both features when it suits your strategy.

4. Families with Variable Income
   Best option: Offset Account

   With salaries, bonuses, and a side hustle, managing cash flow is critical. An offset account lets you park money temporarily and access it when life changes without touching the loan principal.

Why Some Lenders Only Offer One (Not Both)

Not all lenders treat offset and redraw equally. In fact, many only offer one feature, or impose restrictions that aren’t immediately obvious until you’re locked in.

Common Lender Restrictions

• Offset accounts may only be available on premium or packaged loans (which come with higher fees).
• Redraw facilities may be disabled on fixed-rate loans, or only available in-branch or with delays.
• Some lenders offer partial offset (e.g., 40% offset instead of 100%), limiting your savings.
• You may be unable to redraw funds during refinancing or just before settlement.

For example, if your redraw is frozen during settlement, you may need to borrow externally at higher rates potentially costing $2,000 to $5,000 more in short-term finance.

Stryve Broker Insight: We maintain a lender matrix showing which banks allow offset on fixed rates, support unlimited redraw, or let you use both features together.

Combining Offset and Redraw for Maximum Savings

Here’s a powerful home loan strategy we recommend to many of our clients:

1. Step 1: Make Extra Repayments Regularly

   This reduces your loan balance and builds redraw capacity, cutting down your interest faster.

2. Step 2: Use an Offset Account for Short-Term Funds

   Put your salary, savings, or tax refunds into your offset account. This will maximise your daily interest savings without locking your money away.

3. Step 3: Redraw Only for Purposeful Expenses

   Do you need funds for a renovation or an emergency? Redraw when necessary, but keep day-to-day flexibility in your offset account.

Common Mistakes to Avoid

Choosing between an offset account and a redraw facility is more than a technical decision. It affects your interest savings, cash flow, and even tax position. Here are the most common mistakes borrowers make (and how to avoid them).

Mistake 1: Using Redraw Like a Savings Account

Redraw isn’t built for daily spending. Constantly pulling money out slows down your loan reduction and negates your interest savings and slows down loan repayment, especially if withdrawals are frequent.

Stryve Advice: If you need regular access, use an offset. Keep redrawing for occasional or strategic needs.

Mistake 2: Paying for an Offset You Don’t Use

Offset accounts often come with annual fees or higher interest rates. If you’re not keeping a healthy balance in your offset, you could be paying $200–$400 per year in fees without seeing equivalent interest savings, especially if your offset balance is consistently low.

Stryve Advice: We calculate your break-even point and recommend offset only if it delivers value based on your cash flow.

Mistake 3: Redrawing Funds from Investment Loans

If you use redraw from an investment loan for personal reasons (e.g. holidays, cars), you may accidentally cancel your tax deductibility on that portion of the loan.

Stryve Advice: Investors should almost always use offset accounts, not redraw, to keep the ATO happy.

Mistake 4: Getting Locked Out of Redraw When You Need It

Some lenders freeze your redraw facility:

• Before settlement
• During refinancing
• On fixed-rate periods

Borrowers planning to use redraw for renovations or settlement costs are often caught off guard when lenders freeze access during refinancing.

Stryve Advice: We flag lenders with restrictive redraw policies before you sign and advise when to redraw before refinancing.

Mistake 5: Relying on Bank Staff for Strategy

Bank staff can tell you what products they offer, not what’s best across the market. And they rarely explain how one structure affects another (primarily if you’re refinancing, splitting, or investing).

Stryve Advice: We work for you, not the bank, and we structure your loan based on long-term impact, not product features.

Stryve Finance Advice: Offset vs Redraw – Let’s Personalise It

Ultimately, the choice between offset and redraw isn’t just about which one’s “better”; it’s about what’s better for you.

• Are you planning to upgrade in 5 years?
• Want to invest in property and protect tax deductions?
• Need flexibility in case of job changes, kids, or travel?

Unlike most banks, we ask about your future plans because your loan should adapt to your life, not the other way around.

At Stryve Finance, we:

• Compare offset vs redraw across 30+ lenders
• Identify fee-free options with real flexibility
• Design repayment strategies that maximise interest savings
• Structure your loan to match your lifestyle and long-term plans

Frequently Asked Questions (FAQs)

1. Is an offset account or a redraw facility better for investment properties?

   An offset account is generally better. It allows you to reduce interest without affecting your loan balance, preserving tax deductibility for investment loans.

2. Can I have both offset and redraw on my loan?

   Yes, some lenders offer both often as part of split loan packages. At Stryve, we identify which banks let you combine both features effectively.

3. What happens to my redraw if I refinance or switch lenders?

   Your redraw will usually be lost unless you access it before refinancing. Always talk to your broker before making changes.

4. Is money in an offset account safe?

   Yes. Offset accounts are held with banks and are typically covered by the $250,000 government guarantee under the Financial Claims Scheme (FCS).

5. Does offset save more than redraw?

   Not always. It depends on:

   • Your cash flow and savings balance
   • The loan structure and fees
   • How often do you need access to your money

   We’ll help you run the numbers and choose the smarter option.

6. Can I use redraw money for anything I want?

   Yes, but if it’s an investment loan, be careful. Using redraw funds for personal expenses may affect your loan’s tax deductibility.