4 Reasons to Use an Offset Account over Redraw

  1. Security
    • Cash held in an offset account is “your” money whereas cash held in redraw is the bank’s money, meaning they have the ability to take it from you – google “ME Bank redraw scandal”

  2. Future tax implications
    • If you plan to rent out your current home, then you’ll want to avoid using redraw as this “muddles” the original loan purpose. An offset is a completely separate account, avoiding this altogether. I’ve attached a PDF explaining this.

  3. Functionality
    • With redraw, you need to manually transfer additional payments into the loan and then back out again if required. With an offset, you can dump all your cash in, the interest will be automatically reduced and you’ll still have access if required. You can also set up your income to be deposited and have all expenses, including the loan repayments, to come from the offset, so it’s like putting your home loan on autopilot.

  4. Budgeting
    • Some banks will allow you to link multiple offsets against one loan. This means you can separate your accounts into savings, spending, emergency or holiday and the cash held across them all, is collectively offsetting the interest. This is great if you have purchased with a friend or sibling and you don’t want to combine your savings.

With banks starting to offer bigger discounts and offset rates starting from 5.99% what are you waiting for?

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