Offset, Redraw, Fixed or Variable: Is Your Mortgage Set Up to Build Wealth?

Love it.

No, no worries.

Thanks for joining in, Aidan.

Yeah, so off the top, there's, you know, when you're taking out a mortgage, there's a couple of different things to consider.

And one of the questions I get asked a hell of a lot by clients is, Should I have an offset? Should I have a redraw? What's the difference? Are they the same thing? So, yeah, did you want to take us through what, I guess, an offset account is and what a redraw account is?

Yeah, of course.

Yeah, no stress at all.

So when we talk about offset and redraw, I think the biggest difference is in terms of access, flexibility and also day-to-day treatment.

So when you have an offset, it's actually a separate transaction account linked to your home loan.

The balance in the offset in your loan is different.

daily when interest is calculated.

So for example, if you are $500,000 on your home loan and you have $50,000 sitting in your offset, you're actually only paying interest on $450,000.

You still have full, Instant access to that money as well, just like an everyday bank account.

With a redraw, though, it works completely differently.

The actual money that you put into that redraw actually lives inside the loan itself.

So if you've made extra payments above the minimum, that extra amount sits as available redraw.

you can withdraw that later if you need to the interest saving on both of these counts works out to be similar if you have an offset or a redraw but the mechanics of accessing that money is quite different so when we talk about access we talk about offset it funds the funds are available instantly in the same way a debit card works it's you know you could With your card, you can transfers, BPAY, no questions asked.

With the redraw, it requires a request through the bank itself and sometimes with a minimal redraw amount you may need to take out.

And processing delays as well, in some cases, there might be also a fee attached when you do redraw from that facility as well.

Flexibility, offset accounts function like a normal bank account, salary that you're getting paid goes straight into the account.

Bills paid can go straight out of that as well.

And the offset benefits still apply.

The redraw is less flexible day-to-day since it's tied to your loan structure and not designed to consistent transactioning.

And then also on top of that, we talked about day-to-day treatment.

Because an offset is a separate account, the bank doesn't distinguish between your money and the bank's money, it's clearly yours sitting along the loan.

Love it.

No, no worries.

Thanks for joining in, Aidan.

Yeah, so off the top, there's, you know, when you're taking out a mortgage, there's a couple of different things to consider.

And one of the questions I get asked a hell of a lot by clients is, Should I have an offset? Should I have a redraw? What's the difference? Are they the same thing? So, yeah, did you want to take us through what, I guess, an offset account is and what a redraw account is?

Yeah, of course.

Yeah, no stress at all.

So when we talk about offset and redraw, I think the biggest difference is in terms of access, flexibility and also day-to-day treatment.

So when you have an offset, it's actually a separate transaction account linked to your home loan.

The balance in the offset in your loan is different.

daily when interest is calculated.

So for example, if you are $500,000 on your home loan and you have $50,000 sitting in your offset, you're actually only paying interest on $450,000.

You still have full, Instant access to that money as well, just like an everyday bank account.

With a redraw, though, it works completely differently.

The actual money that you put into that redraw actually lives inside the loan itself.

So if you've made extra payments above the minimum, that extra amount sits as available redraw.

you can withdraw that later if you need to the interest saving on both of these counts works out to be similar if you have an offset or a redraw but the mechanics of accessing that money is quite different so when we talk about access we talk about offset it funds the funds are available instantly in the same way a debit card works it's you know you could With your card, you can transfers, BPAY, no questions asked.

With the redraw, it requires a request through the bank itself and sometimes with a minimal redraw amount you may need to take out.

And processing delays as well, in some cases, there might be also a fee attached when you do redraw from that facility as well.

Flexibility, offset accounts function like a normal bank account, salary that you're getting paid goes straight into the account.

Bills paid can go straight out of that as well.

And the offset benefits still apply.

The redraw is less flexible day-to-day since it's tied to your loan structure and not designed to consistent transactioning.

And then also on top of that, we talked about day-to-day treatment.

Because an offset is a separate account, the bank doesn't distinguish between your money and the bank's money, it's clearly yours sitting along the loan.