Promoted by loans.com.au

At loans.com.au, one question we get asked all the time is “what is an offset sub-account and how can I use it?” We explain the difference between the two, how they work, and how you can use an offset sub-account.

What is a redraw facility?

A redraw facility allows you to pay extra money into your home loan that you can withdraw later if you need to. The extra money you pay into the loan reduces your loan balance, which in turn reduces the interest you pay. Your loan balance will still decrease each month according to the terms of your loan. Lenders may impose conditions or a fee for redrawing funds, so check what conditions and charges apply to your loan. If your loan allows you to have your whole pay credited to the loan account and pay bills or use EFTPOS to withdraw funds, it is operating with a redraw facility.

What is an offset sub-account?

An offset sub-account is a separate transaction account that is linked to your home loan and can be used just like your everyday savings account to save money, deposit money and withdraw money. Any money that’s in the offset sub-account is then offset against the balance of your home loan, reducing the amount of interest-accruing balance.

Redraw facilities and offset sub-accounts compared

Both serve the same purpose of reducing the amount of interest payable on the home loan, however, redraw facilities and offset sub-accounts have some key differences:


Offset sub-account

Balance in redraw comes from the extra repayments you have made.

Offset sub-account works just like your everyday bank account. You can nominate the account to receive your salary, or any other regular payments.

Funds in your redraw facility created by extra repayments reduce the interest amount on your home loan.

Money in your account offsets against the balance of your home loan, reducing the interest charged.

Easy access to your funds via transfer to your transaction account.

Instant access to your day-to-day funds. Pay bills and credit card debt, withdraw cash at an ATM, use a debit card.

You can increase the balance in your redraw facility by making extra repayments manually using direct debit.

You can pay your salary into an offset sub-account to get the benefit of your income reducing interest.

What’s right for me?

This will depend on what suits you and your financial situation. If you have a bit of disposable income to put towards the loan but still want the flexibility to access your funds, an offset sub-account can be a good option.

On the other hand, if you’re confident you can handle making additional repayments without needing to access the money on a regular basis, a redraw may be a better solution.

Get started

Our offset sub-account is 100% offset, meaning we take into account all of your money in your offset sub-account when we calculate your benefit.

All of our investment loans have the option of adding an offset sub-account for an additional 0.10% p.a. Chat with one of our lending specialists to find out more or pre-qualify to get started.

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