In Australia, there are two important concepts that you need to understand when you are taking out a home loan: offset and redraw. This blog post will discuss these terms and how they can affect your borrowing power. We will also provide some tips on how to get the most out of your offset and redraw facilities. So, if you’re considering buying a house in Australia, read this post!
What is Offset?
Offset is a type of home loan that allows you to use your savings to reduce the interest you pay on your loan. The amount of money saved is tax-free and can be used as an offset against your loan’s balance. For example, if you have $20,000 in savings and a $200,000 home loan then you can use the savings to offset your loan’s balance, reducing the amount of interest you pay.
What is Redraw?
Redraw is a facility that allows you to access extra funds from your home loan for unexpected expenses or large purchases. The key difference between offset and redraw is that with redraw, you are only able to access funds that have been repaid into your loan account – money won’t be taken out of your savings account as it does with an offset. As such, if you need quick access to cash for any purpose, redraw is a great option.
When considering whether or not to apply for an offset or redraw facility in Australia, there are a few things to consider. First, ensure you understand the fees and charges associated with these two products. Additionally, it is important to think about how to consider how long you plan to keep your loan and whether repayments will be beneficial in the long run. Finally, look into whether or not you are your interest rate by using an offset facility – as this could save you thousands of dollars over the life of your loan.
We hope that this blog has provided you with enough information on offset and redraw so that you can make an informed decision when applying for a home loan in Australia. If you have any further questions or would like more advice on the best way to structure your home loan, speak to one of our friendly mortgage brokers today! They’ll be happy to answer any questions that you may have and can provide tailored advice on how to get the most out of your loan. Happy borrowing!
