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When choosing a home loan, the interest rate isn’t the only factor that matters. Features like offset accounts, redraw facilities, and flexible repayments can make a huge difference to how quickly you pay off your mortgage and how much interest you save. Understanding which features suit your lifestyle and goals can help you avoid unnecessary costs and choose the loan that truly works for you.
In this expert-written guide we will tell you everything you need to know about home loan features, when to use them (and when to skip them).
Extra Repayments: Fast-Track Your Home Loan
Some home loans allow you to make extra payments along with your regular monthly ones. These additional repayments lower your loan’s principal amount. This means you will pay less interest during the loan term.
Extra repayments can be a great way to save money on interest over the lifetime of your loan and pay off your home loan faster. For example, paying an extra $200 each month on a $500,000 loan with a 5% interest rate could save you nearly $80,000 over the life of your loan.
Some loans do not allow you to make extra repayments. This often happens with fixed-rate loans. Some lenders may also limit how much extra you can pay each year. They might also charge fees if you pay off your loan early. However, some loans do let you make unlimited additional repayments. It is important to read the terms carefully.
Read more: Home Loan Extra Repayment Calculator
Redraw Facility: Access Extra Funds When You Need Them
A redraw facility lets you use any extra money you have paid. This can be helpful if you face an emergency or need to pay for large expenses later.
This feature is very important. It helps you save money on interest. You can still get to your money when you need it. By lowering your loan amount, you can earn more interest than if you just keep your cash in a regular savings account.
- Fixed-rate loans often do not allow this option.
- Some lenders may charge a fee if you wish to get money back.
Offset Account: Lower Your Interest, Keep Your Flexibility
An offset account is a kind of transaction account connected to your home loan. The money in this account helps lower the interest you pay on your mortgage. For instance, if your loan is $300,000 and you have $50,000 in your offset account, you will pay interest only on $250,000.
Offset accounts can help you save on interest. You can access your money whenever you need it. Unlike savings accounts that earn taxed interest, offset accounts allow you to save on interest without any tax charges. This is useful, especially if you have to pay a lot in taxes.
Do you need it?
Offset accounts are a great feature, and they offer a lot more flexibility compared to a redraw facility.
If you’re using a redraw, you’ll need to jump through a few extra hoops to access your money.
With an offset account, the money is there whenever you need it – it’s a normal transaction account.
The downside of an offset account compared to a redraw facility is the cost. You’ll need to be on a professional package for an offset account, which typically costs $400 per year.
Assuming an interest rate of 4%, you would need to have $10,000 in your offset account to justify the cost of the professional package compared to a basic loan with a redraw facility.
Read more: What is an Offset Account?
What Is A Redraw Facility?
A redraw facility lets you withdraw extra repayments you’ve made on your home loan. It’s different from an offset account because the money stays tied to your loan, not a separate savings account. In simple terms, it turns your extra repayments into accessible funds without needing a new account.
How Redraw Works
Every month, you pay a minimum loan repayment. If you pay extra, those funds go into your redraw.
Example:
- Minimum repayment: $3,000/month
- You pay: $3,500/month
- Extra $500 reduces your loan balance and interest until you withdraw it
Redraw funds continue to reduce your interest costs while remaining accessible when needed.
Benefits of a Redraw Facility
Using a redraw facility can help you save money and stay flexible:
- Interest savings: Extra repayments reduce your loan balance, lowering interest charged.
- Access to funds: Withdraw money later for emergencies, renovations, or investments.
- Forced savings: Encourages disciplined repayments without needing a separate savings account.
Limitations & Things to Check
Before using redraw, be aware of some restrictions:
- Some lenders limit the number of redraws per year.
- Fees may apply when accessing redraw funds.
- Access may differ online versus in-branch.
- Funds might take a few days to become available.
Who Benefits Most from a Redraw Facility?
Redraw is ideal for borrowers who:
- Want to reduce mortgage interest with extra repayments.
- Need access to funds occasionally but don’t maintain large savings balances.
- Prefer a loan-tied solution instead of a separate offset account.
Offset Accounts vs. Redraw Facilities vs. High-Interest Savings Accounts: Which Is Better?
When choosing the right home loan features, it’s important to understand how each option affects your savings, interest, and access to funds. Different features work better depending on your financial goals and lifestyle. Comparing offset accounts, redraw facilities, and high-interest savings accounts can help you make the best decision. The table below summarises the key points for each feature.
Feature | How It Works | Benefits | Considerations | Tax Implications |
Offset Account | Linked to your home loan; reduces loan balance for interest calculations | Tax-free interest savings; funds easily accessible | Higher fees ($400 package); needs large balance for full benefit | Interest saved is not taxed; effective return equals mortgage rate |
Redraw Facility | Extra repayments are stored in loan; can be withdrawn later | Reduces loan balance and interest; encourages faster repayment | Limited access or redraw fees; less flexible than offset | No tax on savings, but withdrawal may be delayed |
High-Interest Savings Account | Money in separate account earning high interest | Potentially higher interest rates; keeps savings separate from mortgage | Interest is taxable; may yield less net savings than offset | Taxable income reduces effective return; higher tax rates lower net benefit |
Which Option Is Best? | Depends on your goals and cash flow needs | Offset: quick access & tax-free savings; Redraw: faster loan repayment; Savings: separate account with interest | Consider fees, balance requirements, and withdrawal flexibility | Consider personal tax situation for net benefits |
Split Rate Home Loans: Get the Best of Both Worlds
A split rate loan home loan allows you to separate your loan into two parts. One part has a fixed interest rate. This means your payments stay the same. The other part has a variable rate, which offers you more flexibility. With this setup, you get the security of consistent payments. You can also make extra repayments on the variable part.
A split rate might be a good choice if you are concerned about interest rate changes but still want to make extra payments. It provides security and also offers some flexibility.
These loans are often hard to understand. They generally come with added fees and rules. However, they can be helpful if you think interest rates will change a lot. They may also help you reduce your risk.
Interest Only Home Loans: Lower Payments, But at a Cost
Interest-only loans let you pay just the interest for a specific time. This means your monthly repayments are lower.
This choice matters a lot. It can give you extra money to spend, mainly for investment properties. Investors can also deduct the interest on their taxes.
In the long term, you will pay more interest. This happens because you are not lowering the main amount of the loan, and you are just paying the interest. This option works well for investors or people who need extra cash for a short time.
Flexible Repayment Options: Match Your Payments to Your Budget
Most standard home loans allow you to decide how often you want to make payments. You can pay every week, every two weeks, or once a month. If you pick to pay every two weeks, you might make one extra payment by the end of the year. This can help lower the total interest you need to pay.
Paying your loan every week or every two weeks can save you money in the long run. It is easy and does not require much effort. When you match your payment schedule with your income, it helps you handle your payments better.
Repayment Holidays: A Short-Term Break for When You Need It
Some lenders allow you to stop making repayments. This break gives you a chance to pause your mortgage payments for a little while if you are facing money issues.
This choice is very important. It can help you find space when times are tough. For example, it could support you if you lose your job or need some time off from work.
- Be careful.
- If you miss a payment, it will go onto your loan balance.
- This means you will owe more interest later.
- Only use this option if you truly need to.
Line of Credit Home Loans: Borrow as You Go
A line of credit home loan allows you to borrow money up to a certain limit when you need it. It works like a credit card. You will only pay interest on the amount of money you have taken out.
This feature can help you with your renovations or other projects. You might need money bit by bit over time for these tasks.
A line of credit can have higher interest rates and fees. It is suitable for people who handle their money carefully. It is also good for those who get ready for big, unexpected costs.
Loan Portability: Keep Your Loan When You Move
Loan portability lets you transfer your current home loan to a new house. This option is great if you are moving to a better home. It helps you skip the trouble of applying for a new loan.
This feature is important. It helps you sell your home and buy a new one at the same time. It lets you avoid refinancing.
- Both properties need to close on the same day.
- This can be difficult to set up.
Professional Package Discounts: Get More for Your Money
A professional package costs about $400 each year. With this package, you receive several benefits. You won’t need to pay application fees. You also get lower interest rates and no annual fees for your credit card.
They help with loans that are more than $250,000. They can save you money by reducing fees and interest rates. You can choose from a range of products for extra convenience.
Comparing Features Across Loan Types
Choosing the right home loan features depends on your loan type. Variable, fixed, and split loans each work differently. Knowing how features like offset accounts, redraw, and flexible repayments work can help you save money and manage your loan better.
How Features Work for Different Loans
- Variable Rate Loans
- Offset Account: Available and easy to use.
- Redraw Facility: Extra repayments reduce your interest.
- Repayment Flexibility: Change payment frequency or make extra payments anytime.
- Pros: Flexible and can benefit from falling interest rates.
- Cons: Interest can increase, making repayments higher.
- Fixed Rate Loans
- Offset Account: Sometimes limited or partial only.
- Redraw Facility: Access may be restricted, sometimes with fees.
- Repayment Flexibility: Extra payments may be limited; early repayment fees can apply.
- Pros: Payments stay the same, making budgeting easier.
- Cons: Less flexible, and you miss out if interest rates drop.
- Split Rate Loans
- Offset Account: Usually only the variable portion works with offset.
- Redraw Facility: Only available on the variable part.
- Repayment Flexibility: Can make extra payments on the variable portion.
- Pros: Combines stability of fixed rates with some flexibility.
- Cons: Slightly more complex to manage
- Variable Rate Loans
Quick Feature Comparison Table
Feature | Variable Loan | Fixed Loan | Split Loan |
Offset Account | Full access | Limited | Variable portion only |
Redraw Facility | Flexible | Limited | Variable portion only |
Repayment Flexibility | High | Limited | Partial flexibility |
Interest Rate Risk | Can go up or down | Fixed | Mixed risk |
Comparing features across loan types helps you choose the home loan that suits your needs. Think about access to funds, interest savings, and how much flexibility you need.
Hidden Costs and Limitations To Watch Out For
Not all home loan features are as simple as they seem. Some come with hidden costs or restrictions that can affect your budget and savings.
Common Traps
- Offset Accounts with High Fees: Some offset accounts require a professional package or annual fees. These fees can outweigh interest savings if your balance is small.
- Redraw Restrictions: Lenders may limit how often you can access redraw funds. Some charge fees for withdrawals.
- Early Repayment Penalties: Fixed-rate loans sometimes include fees if you pay off your loan early. Always check the terms.
- Line of Credit Costs: While flexible, lines of credit can have higher interest rates and annual fees.
Fine Print Borrowers Often Overlook
- Minimum balance requirements for offsets or redraws.
- Limits on accessing extra repayments or redraw funds.
- Fees for switching loan features, refinancing, or partial offsets.
- Rate lock expiry dates or conditions.
Why the “Cheapest” Rate Isn’t Always the Best
A low headline interest rate may look attractive but doesn’t include fees, restrictions, or missing features. Always consider:
- Comparison Rate: Reflects both interest and most fees. A higher comparison rate may be better if it includes useful features.
- Feature Value: If an offset account costs $400/year but only saves $100 in interest, it may not be worth it.
- Flexibility vs. Cost: Loans with more flexibility, like redraw access or repayment holidays, may cost more but provide peace of mind.
By understanding these hidden costs and limitations, you can avoid surprises and choose the home loan features that truly benefit your financial situation.
How To Choose The Right Loan Features For You
Home loans come with many features, but not every option suits every borrower. Choosing the right home loan features can save money and simplify your mortgage journey.
Key Considerations
- Personal Objectives: Decide if you want to pay off your loan quickly, have flexibility, or start with lower payments.
- Comparison Rate: Always check the comparison rate. It shows the interest rate plus most fees, helping you see the true cost.
- Variable vs. Fixed Rates: Fixed rates give predictable repayments, while variable rates can save you money if rates drop.
- Lenders Mortgage Insurance (LMI): If your deposit is under 20%, LMI may apply. Include this in your total cost calculations.
- Rate Lock: If choosing a fixed-rate loan, a rate lock secures your rate from application until settlement.
Ask Yourself the Right Questions
- Do I need flexibility to access extra funds?
- Do I prefer stable, predictable payments?
- Am I trying to reduce upfront costs or long-term interest?
- Which features will I actually use regularly?
- Will tax or investment considerations affect my choice?
Matching Home Loan Features to Common Scenarios
- First-home buyers: Often focus on low upfront costs and simple, easy-to-use features.
- Refinancers: May want tools like offset accounts or redraw facilities to reduce interest and improve cash flow.
- Investors: Typically prioritise tax efficiency, cash flow, and features like interest-only options or offset accounts.
Tips to Avoid Feature Overload
- Only choose features you will actively use. Extra options increase costs.
- Compare value versus cost—a $400 annual fee may not be worthwhile for a small offset balance.
- Keep it simple: a basic loan with one or two key features often saves more than a fully loaded loan.
- Discuss your needs with a mortgage broker to avoid paying for unnecessary extras.
Expert Tip
The best way to find the right features is to speak with an experienced mortgage broker. They will tailor a plan based on your goals. Brokers also help you understand the product disclosure statement and target market determination for different loans.
Some features add real value, while others cost more without much benefit. Choosing wisely ensures your home loan works for you, not against you.
Call us on 1300 088 065 or complete a free assessment to speak with one of our home loan experts.
Case Study: How An Offset Account Saved Emma $25,000 in Interest
Emma, a 32-year-old first-home buyer in Brisbane, purchased a home worth $800,000. With disciplined saving, she managed a 20% deposit ($160,000), leaving her with a loan of $640,000 on a 30-year term at an interest rate of 6%.
Challenge
Although Emma secured a competitive rate, she worried about how long it would take to pay off her mortgage and how much interest she’d end up paying over time. She wanted a way to cut down interest without locking herself into higher monthly repayments she might not always manage.
Solution
Emma chose a variable home loan with a 100% offset account. She kept $20,000 in savings consistently in the offset account and added extra funds when she received annual bonuses and tax refunds. Because the offset account directly reduced the balance used to calculate interest, her loan behaved as though it was $620,000 instead of $640,000.
Results
By using her offset account wisely, Emma shaved around 3 years off her loan term and saved approximately $25,000 in interest over the first 10 years of her mortgage. Best of all, she kept full access to her money if she ever needed it, giving her both savings and peace of mind.
Key Takeaway
Loan features like an offset account only create real value when they align with borrower habits. Emma’s consistent savings made the offset account one of the smartest financial tools in her mortgage journey.
Bonus: Government Schemes & Grants For First Home Buyers
The Australian Government offers several schemes to help first home buyers enter the property market faster. These programs reduce upfront costs and make homeownership more achievable. By using them wisely, you can save thousands and avoid unnecessary fees.
First Home Guarantee (FHBG)
The FHBG helps first home buyers purchase with as little as a 5% deposit.
Recent changes from October 2025 make it even easier to access.
Key updates:
- No income caps: All eligible buyers can now access the scheme.
- Unlimited places: The previous cap of 35,000 is removed.
- Higher property price caps: Reflect current market values, allowing more options.
- No LMI required: A 5% deposit is enough to avoid mortgage insurance.
Eligibility:
- Must be an Australian citizen or permanent resident.
- At least 18 years old.
- Must intend to live in the property.
- Cannot have owned property in the past 10 years.
Read more: Housing Australia First Home Guarantee
Family Home Guarantee (FHG)
The FHG supports single parents or legal guardians with at least one dependent.
Features:
- 2% deposit: Buy a home with minimal upfront costs.
- No LMI: Government guarantees up to 18% of the loan.
- Previous homeowners eligible: Unlike FHBG, you may have owned property before.
Eligibility:
- Australian citizen or permanent resident, aged 18+.
- Single parent or legal guardian with one or more dependents.
- Income capped at $125,000 in the previous financial year.
State-Based Grants
States offer additional support for first home buyers.
- NSW: Up to $10,000 for new homes under $600,000.
- Victoria: Up to $10,000 for new homes under $750,000.
- Queensland: Up to $30,000 for new homes under $750,000.
- South Australia: Up to $15,000 and stamp duty exemptions for homes under $650,000.
- Western Australia: Up to $10,000 for new homes under $750,000.
- Northern Territory: Up to $50,000 via HomeGrown Territory Grant.
- ACT: Stamp duty exemptions up to $34,270 via Home Buyer Concession Scheme.
Tip: Eligibility and application steps vary by state. Consult local authorities or a mortgage broker for guidance.
Impact on Loan Features
Using these schemes can affect your home loan in several ways:
- LMI savings: Government guarantees can eliminate the need for LMI, saving thousands.
- Loan features: Offset accounts or redraw facilities may be limited.
- Interest rates: Some lenders adjust rates based on participation in schemes.
Next Steps
Speak with a mortgage broker to see which schemes you qualify for. They will provide tailored advice and guide you through each application.
Frequently Asked Questions (FAQs)
What is a redraw on a home loan?
A redraw lets you access the extra repayments you’ve made on your loan. Your available balance on home loan determines how much you can redraw.
Can I use my redraw to pay my mortgage?
Yes, in Australia you can often use your available redraw to make mortgage payments or cover other expenses.
How does a redraw account reduce interest?
Every extra dollar you repay reduces your loan balance. A lower balance means less interest charged over time.
What’s the difference between an offset account and a redraw facility?
An offset account reduces interest using your savings balance. A redraw facility gives access to extra repayments you’ve already made.
Which is better for saving money: offset or redraw?
Offset accounts are more flexible and tax-efficient. Redraw facilities are better if your goal is to pay off your loan faster.
How much can I redraw on my home loan?
You can usually redraw up to the total extra repayments you’ve made. Check your home loan available balance and lender rules.
Are there fees for using a redraw facility?
Some lenders charge fees or limit the number of redraws. Free unlimited redraw home loans are the most flexible option.
Can I have both an offset account and a redraw facility?
Absolutely. Many full-feature home loans allow both, helping you reduce interest and still access funds when needed.
How do redraw and offset features benefit mortgage customers in Australia?
They reduce interest, shorten loan terms, and give repayment flexibility—helping borrowers save money and pay off loans faster.
What is the best home loan with offset and redraw in Australia?
Variable home loans with offset accounts and free unlimited redraw are top options. Speak to a mortgage broker for personalised advice.
Glossary of Key Terms
- Additional Repayments: These are payments that go beyond your regular loan payment. They help reduce the total amount you owe faster.
- Fixed Rate Loan: This type of loan has a fixed interest rate for a certain time.
- Variable Interest Rate: This interest rate may change over the loan term depending on market conditions.
- Comparison Rate: This rate combines the interest rate and most fees. It helps you see how much the loan will cost you in total.
- Lenders Mortgage Insurance (LMI): This insurance protects the lender if you can’t pay back the loan. You usually need it if your down payment is less than 20%.
- Rate Lock: This feature lets you secure an interest rate for your loan application for a certain period.
Next Steps And Getting Your Home Loan Approved
Our team at Hunter Galloway is here to help you buy a home in Australia. Unlike other mortgage brokers who are just one person operations, we have an entire team of experts dedicated to help make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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