A redraw facility lets you make extra repayments into your home loan and take them back out later. An offset account is a separate transaction account linked to your loan, and every dollar in it reduces the balance you're charged interest on, calculated daily. Both cut the interest you pay, but an offset keeps your savings separate and easier to access, while lenders can limit or change redraw.

In this short video, McKern mortgage broker Mark Jones explains how each works and how to decide between keeping spare cash in an offset or putting it into a term deposit. Money in an offset effectively 'earns' your home loan rate, tax-free, so it usually beats a savings account or term deposit unless those pay more than your loan rate after tax.

In this video

0:00 Redraw vs offset

0:35 Offset or term deposit?

General information only, not personal advice.