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Offsets and Redraws


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#1 BlueMeanie

Posted 26 January 2013 - 09:43 PM

Does anyone use an offset account and find that it saves them money?

Looking at most of the banks, it seems that the privilege of an offset account costs ~ $15 a month, plus ~ 0.7% extra interest, compared to a fee free, unlimited redraw, no-frills loan.  

Everything I have read has said that offset accounts are the way to go because they can save you thousands of dollars, but my calculations say it would cost me a significant amount.  Have I got something wrong?

ps. We don't have plans to use the property as an investment down the track.

#2 jen88

Posted 26 January 2013 - 09:48 PM

i'm certainly no expert but we have an offset account that has no fees and I get a very good rate on the loan. It saves thousands in interest, but I guess that depend how much $ you are anticipating being in that account each month.

#3 Frazzled Cat

Posted 26 January 2013 - 09:49 PM

The money saved is on the interest.

Say, loan of 300,000.
Offset has $20,000 in it.

interest is calculated on 280,000, thus saving you X dollars.  

so even with a little extra fees and a smidgy higher rate, you can save money.

I'm not sure of the difference paying extra off the mortgage though, my knowledge isn't that good!

#4 cassi8

Posted 26 January 2013 - 09:52 PM

The idea is that you use the offset as a savings acct so any money in there effectively reduces your mortgage balance and therefore reducing the interest charged on the balance. Over the long term the savings can be substantial and the money is still available if you need it for something.

I have one and it works for us. The interest rate is still very competitive with other standard variable rates and the offset savings more than cover the annual fee.

#5 B.3

Posted 26 January 2013 - 09:54 PM

We use to have an offset account. It was free and offset 100%.
The bank then started charging us $15 a month so we got rid of it and just put our money directly onto the mortgage with the option to redraw anytime for free.
Now they want $50 every time we redraw and it's no longer free.  mad.gif

I am fed up with my bank so we are looking to remortgage with another. Many banks though have free 100% offset accounts. It's probably easier to go with offset rather than re-draw because you can put your wages and everything into it and have it separate at the same time whilst saving you interest. If they are going to slug you $15 and 0.7% though I'd either a. find a different bank or b. go with the free redraw option.

#6 IsolaBella

Posted 26 January 2013 - 09:55 PM

Like PP we have professional package which has reduced interest rate and had he annual and monthly fees waived. We also keep decent money in the offset account.

So yes it does save us money. In 5yrs we reduced our mortgage by an extra $30 k.



#7 wannabe30

Posted 26 January 2013 - 09:57 PM

I think it depends on whether you hAve any extra money leftover after paying the mortgage each month.  For us, we have a substantial amount in savings, which we add to each month. All that money sits in the offset/redraw and saves us far more in mortgage interest than we would ever make if we invested it.

However, if you don't have a lot of extra (either in existing savings or as "leftover" after each month's mortgage payment comes out) you are probably better off with a lower fee account.

Also, it's worth looking around for a better deal. We pay a yearly fee ($350??) for offset, redraw and credit cards, but we have no monthly fees and certainly don't pay any more interest for the privilege.

#8 B.3

Posted 26 January 2013 - 09:59 PM

QUOTE (susan2000 @ 26/01/2013, 09:43 PM) <{POST_SNAPBACK}>
Everything I have read has said that offset accounts are the way to go because they can save you thousands of dollars, but my calculations say it would cost me a significant amount.  Have I got something wrong?



Neither of them will 'cost' you any money, they will both save you money in interest that you pay.

One may 'cost' (or rather save you less money) than the other though if the offset has fees and a higher interest rate than the other mortgage that offers free redraw.

#9 SeaPrincess

Posted 27 January 2013 - 08:16 AM

It very much depends on the bank or loan package that you have.  When we first took out a mortgage, the bank we went with told us that the extra interest and fees to have an offset account would only be worth it if we always had at least $10,000 in the offset, vs their fee-free no-frills package with free re-draw.  The only catch at the time was that the minimum re-draw was $2,000, but now it's only $500.

We currently have a Breakfree package with ANZ, which is good - offset and free redraw.

OP, look around some more, or speak to a mortgage broker.  You should be able to find something better, otherwise I would go for the no frills and free redraw.

#10 Pearlberry

Posted 27 January 2013 - 08:55 AM

We have both an offset and redraw. The offset is our everyday account and can have anything down to zero in it.

In addition just after we get paid, we put a good  chunk of money into our mortgage (pay yourself first ;-)). We have agreed that money is only to be withdrawn to buy assets (investments).

We have still saved a lot of money from having the offset.

Ours is fee free for withdrawals and having the offset. We don't have monthly fees. Shop around and negotiate with the banks. Remember, they want your business.

#11 countrymel

Posted 27 January 2013 - 09:03 AM

Our mortgage is with a building society, the offset account has no fees but only a limited amount of free withdrawals per month.

We were using it as our everyday account but have changed to a third account for that (as the 'too many withdrawal charges were making us grumpy), the offset is now our savings account, all my pay and a proportion of DPs go in there.

We have the redraw facility but have never used it (so far!)

Works for us.


#12 BlueMeanie

Posted 27 January 2013 - 12:13 PM

QUOTE (Bek+3 @ 26/01/2013, 09:59 PM) <{POST_SNAPBACK}>
Neither of them will 'cost' you any money, they will both save you money in interest that you pay.

One may 'cost' (or rather save you less money) than the other though if the offset has fees and a higher interest rate than the other mortgage that offers free redraw.


Yeah, that's what I meant.  original.gif


QUOTE (SeaPrincess @ 27/01/2013, 08:16 AM) <{POST_SNAPBACK}>
It very much depends on the bank or loan package that you have.  When we first took out a mortgage, the bank we went with told us that the extra interest and fees to have an offset account would only be worth it if we always had at least $10,000 in the offset, vs their fee-free no-frills package with free re-draw.  The only catch at the time was that the minimum re-draw was $2,000, but now it's only $500.

We currently have a Breakfree package with ANZ, which is good - offset and free redraw.

OP, look around some more, or speak to a mortgage broker.  You should be able to find something better, otherwise I would go for the no frills and free redraw.



We're with ANZ now, and just put all our savings into the loan and a redraw when necessary. We've got the Simplicity Plus I think it's called, at 5.7%  If we switched to the Breakfree package we would need to maintain an average balance of $8000 in our offset account ABOVE what we are paying in extra now before we would even 'break even' with .the extra costs. Or so it seems from my calculations.   That's why I'm wondering whether I've got something wrong.

#13 MuddyPuddles

Posted 27 January 2013 - 02:11 PM

We have the ANZ Breakfree package also. Offset is fee free, and its our everyday account so we take money out all the time for no charge. There's only an annual fee of $350 which we are fine with and the interest rate on our loan is 5.6%. I looked around at other options but have decided to stay with them for the house we just bought as its the best option we found.

#14 75etd

Posted 27 January 2013 - 03:54 PM

Definitely worth looking around both by yourself and with a good broker. We are with Suncorp and pay a $25 per month fee ($300pa) and have both the offset and redraw facilities. We've managed to negotiate a decent discount on the standard variable rate and a have split loans. We had no fees when we split the loans because of the professional package. We can have numerous offset accounts with or mortgage and have the childrens savings in one of the accounts. A pay them the interest they would have earned, and we are still ahead.  

As an accountant I would never use a redraw facility unless there really was no other option. I am happy to pay for the flexibility of the offset facility, as it enables flexible savings in a tax effective manner.

I can totally understand the limited or nil benefit of the facility if you have limited capacity to save and truly believe thereis no wary the property could ever be an investment property. Consider things like having to move away from the area for work knowing you would return a year later, death of a partner, receive some sort of windfall, etc


#15 ~*MissPriss*~

Posted 27 January 2013 - 04:38 PM

Another way to maximise the advantages with the offset account is incorporating the use of a credit card. By putting all of you expenses on a credit card, you wages effectively sit in the offset account thus reducing interest. At the end of the cycle pay the credit card in full, therefor no interest on the credit card and your wages has worked harder for you.

Edited by ~*MissPriss*~, 27 January 2013 - 04:39 PM.


#16 BlueMeanie

Posted 27 January 2013 - 04:44 PM

Hmm... It still seems that we've probably got the best product for us.  

At the moment, our total annual fees across all our loans and accounts is I think $73, we don't need to borrow enough to get any discounts with a professional package, and our borrowing capacity isn't high enough to warrant borrowing the maximum to use later as investment: with our maximum we couldn't really buy another property to rent the current one out.  We are on a single income at the moment, and will be for another 4-6 years. If something happened that I had to go back to work unexpectedly, then we'd restructure our finances anyway.    We do save quite a bit - probably $600 a month extra goes onto our loan - and we average $4000 in our transaction account and some savings accounts that I'm going to consolidate onto our loan. (I was using them to learn to budget a bit better.

But thanks for all your suggestions.  Personal Finance is a good description, I guess, because it is 'personal', and one size doesn't fit everyone.

#17 amabanana

Posted 27 January 2013 - 04:59 PM

QUOTE (wannabe30 @ 26/01/2013, 10:57 PM) <{POST_SNAPBACK}>
I think it depends on whether you hAve any extra money leftover after paying the mortgage each month.  For us, we have a substantial amount in savings, which we add to each month. All that money sits in the offset/redraw and saves us far more in mortgage interest than we would ever make if we invested it.

However, if you don't have a lot of extra (either in existing savings or as "leftover" after each month's mortgage payment comes out) you are probably better off with a lower fee account.

Also, it's worth looking around for a better deal. We pay a yearly fee ($350??) for offset, redraw and credit cards, but we have no monthly fees and certainly don't pay any more interest for the privilege.


We do this too.
The credit card attached also has things like travel and transport insurance which we use.  That has 'saved' us money also.  The international travel insurance, for example, covers the whole family and means I don't have to take out a policy when we go on holiday.  original.gif  Using the credit card for everything and paying it off at the end of the month not only keeps the money in the offset account as long as possible but we 'earn' several hundred dollars worth of vouchers every year which helps pays for groceries.

#18 SeaPrincess

Posted 27 January 2013 - 06:14 PM

QUOTE (susan2000 @ 27/01/2013, 10:13 AM) <{POST_SNAPBACK}>
We've got the Simplicity Plus I think it's called, at 5.7%  If we switched to the Breakfree package we would need to maintain an average balance of $8000 in our offset account ABOVE what we are paying in extra now before we would even 'break even' with .the extra costs. Or so it seems from my calculations.   That's why I'm wondering whether I've got something wrong.

Our only cost is the annual fee, and the interest rate on our variable loan with the Breakfree package is currently 5.4%.

#19 MrsLexiK

Posted 27 January 2013 - 06:39 PM

QUOTE (SeaPrincess @ 27/01/2013, 07:14 PM) <{POST_SNAPBACK}>
Our only cost is the annual fee, and the interest rate on our variable loan with the Breakfree package is currently 5.4%.


You have obviously gotten your rate down because the website states the variables currently 6.4%, maybe 5.4% is the professional rate (I think that is what my simplicity plus rate is not the 5.7% listed - but generally our mortgage we got wouldn't have given us the lower rate) and break free according to the website is not available to the simplicity plus.

OP, we took out the simplicity plus because at the time, myself, my step father and the loan manager all worked out that we would need $10k in the offset to make it worthwhile. (Based on the difference in what rates they could give us, etc) we pay more into our loan then we need. At present we haven't used it, I basically look at it as we can't redraw on it unless we need it (ie DH gets fired and we need to pay the mortgage, we would just use the funds in there) I know I wouldn't be as disciplined having the money sit in the offset.

Now our income and savings has grown and we could have $10k sitting there in savings and save money on interest I know it is "safer" sitting in our savings account which I don't see when I log into my app or Internet banking. Maybe when our incomes have grown again in a few years we my relook. I have just now developed the discipline to put everything on the credit card and paying off in full and not sticking more on then we can afford.

Edited by MrsLexiK, 27 January 2013 - 06:41 PM.


#20 GoodGollyMolly

Posted 27 January 2013 - 06:49 PM

We save hard and have an offset account. Both our pays go into it and I have set debits that allocate cash to other accounts for everyday spending/bills etc.

DH loves logging in to Internet banking to see how much interest we're saving by having the offset (which it calculates daily). At te moment we're saving over $200 a month with it.

#21 Ally'smum

Posted 31 January 2013 - 12:16 PM

The money in our offset is saving us $150 per month, the annual fee to have it is $400 so it is worthwhile at the moment, but with less in the savings account or paying less interest on the loan it might not be.




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