Offset vs Redraw: What’s the Difference, and Which One Is Better for Healthcare Workers?

Healthcare Home Loans
Jul 28
3 min read

Updated: Aug 6

If you’re a healthcare professional with a mortgage or planning one, you’ve probably heard terms like offset account and redraw facility thrown around. But understanding how they work can literally save you thousands in interest and cut years off your home loan.

The good news? You don’t need to pay more. You just need to structure your money smarter.

What is an Offset Account?

An offset account is a transaction account linked directly to your home loan. Every dollar in that account reduces the amount of interest you’re charged because your lender calculates interest on your loan balance minus what’s in the offset.

For example:

Home loan: $500,000
Offset account balance: $50,000
Interest is only charged on: $450,000

You have full access to the money via ATM, BPAY, or transfers, while saving on interest daily.

Common Misconception: Offset Accounts Don’t Lower Your Repayments

Many borrowers mistakenly believe that putting money in an offset account will reduce their actual monthly repayments. This is not true unless you’re on an interest-only loan or have structured your loan with a split that includes an

interest-only portion.

Here’s how it really works:

On a principal and interest (P&I) loan, your repayments are fixed based on your original loan amount, term, and interest rate. Even if you reduce interest via an offset account, your repayment stays the same. However, more of each repayment goes toward the principal, which helps you pay off the loan faster.
On an interest-only loan, your repayments are based only on the interest portion. So if you hold funds in your offset, the interest charged is genuinely reduced, meaning your repayments may be lower month to month. This is particularly effective for investors or those managing cash flow through a split-loan strategy.

What is a Redraw Facility?

A redraw lets you make extra repayments on your loan and access those extra payments later. This helps you reduce your loan faster but still gives you access to those extra funds for things like renovations, holidays, or emergencies.

Example:

Minimum repayment: $2,000/month
Actual repayment: $2,500/month
The extra $500 goes into redraw and can be accessed later.

Real Story: How Ben & Priya Saved $120K

Ben and Priya, both nurses, had just purchased their first home with a $600,000 loan. They also had $30,000 in savings, but weren’t sure whether to put it straight onto the loan or keep it in their bank account.

Their broker suggested using an offset account, giving them full access to their money while still reducing the interest charged on their loan.

They didn’t increase their repayments.

They didn’t lock their savings away.

They simply parked the $30,000 in their offset.

The result?

They saved over $120,000 in interest and paid off their loan almost 4 years faster, just by using the right structure from the start.

Healthcare Insight:

Many healthcare professionals, especially those working shifts or on variable income, benefit from the flexibility of an offset account. You can build up savings in high-income months and draw down during quieter periods, all while reducing interest costs.

If you’re on a high-LVR loan with an LMI waiver (often available to healthcare workers), using offset or redraw features smartly can help you make the most of your discounted loan.

What to Ask Your Broker

Does my loan offer both offset and redraw?
Are there fees or restrictions on accessing redraw?
Can I have multiple offset accounts?
Should I split my loan between fixed and variable to use both features?
Which option suits my income flow and financial goals?

What to Ask Your Broker:

Does my loan offer both offset and redraw?
Are there fees or restrictions on accessing redraw?
Can I have multiple offset accounts?
Should I split my loan between fixed and variable to access these features?
Which option fits my profession’s income flow and financial goals?

Bottom Line:

Offset and redraw are not just features. They are powerful tools that, when used wisely, can help you save interest, stay flexible, and fast-track your financial freedom.

At Healthcare Home Loans, we specialise in helping healthcare professionals structure their loans smarter so you can build wealth, not just make repayments.

Book In