REDRAW V OFFSET

[galinavot]

My current loan 5.84% has a redraw only (no offset). I believe that basically they both work the same way reducing my interest, with the main difference being Tax implications if I use the redraw (for non Home improvement renovations etc).
This isn’t an issue as there is no chance of us renting the home and if ever it was, it would be well after it’s paid off.
Assuming I’m correct here, is there any other issues I should consider regarding putting more money into the redraw and using it later to pay bills etc, assuming I’ve budgeted well. Planning to put a calculated value of money into the redraw each fortnight knowing over 12 mths this will be used for the specific high cost bills, (insurance, regos, etc), and the redraw already in there will not be touched. (So won’t be going backwards).
Any thoughts or recommendations re this? Thx.

 

[laurenkim]

@galinavot I'm on fixed redraw account. Part of the fixed terms is that I can't redraw until fixed period is up.

Better to call your bank than ask us.

 

[aliasunkn0wn]

@laurenkim I think St.george, BankSA, Bank of Melbourne and Westpac are the only banks to let you redraw all your fixed extra repayments ($30k limit)

 

[brianhex]

@galinavot I've had a redraw for 8 years. It was a cheaper interest rate than offset and also didn't have to pay for a bs "wealth package" aka an annual fee for the privilege of using an offset.

 

[raphaelcrombez]

@galinavot If you're on a variable rate, there's nothing wrong with this strategy

 

[galinavot]

@raphaelcrombez Yeah, it’s a variable rate.

 

[theyearofthelady]

@galinavot If I was you I would stick with redraw.

Ignore the propaganda about banks taking the facility away or reducing it, the big one was mebank that did it, they got fined and reversed it all, and they only did it to a handful of customers that were deemed to be at risk of not being able to payback the loan. Sure it "can" happen to you, but from reading your situation it will be fine you're not talking about huge amounts anyway.

Many people are just parroting the same thing, "must have offset" without ever really critically thinking it through.

I had offset a couple of times, and found I didn't get enough benefit for the higher interest rates & annual fees involved, so my last few refinances I just went for the most basic loans which had the lowest interest rates, no annual fees and a redraw facility, I found redraw alone was perfect for most things and just as useful to me as offset. Redraw for most banks are as simple & fast as transferring money between accounts (from your loan to your transaction/savings account typically), it takes no time to do the money is at your fingertips.

 

[regent]

@galinavot The main difference is that you have to ask to redraw, with an offset the money is already yours in an account.

Not an issue unless some unfortunate situation arose where the bank doesn’t want to give you the money back. Maybe you’re now unemployed, and the bank doesn’t trust they will get it back etc. Then the offset would have been better.

 

[lachjames]

@regent ??? I have a redraw and I can just withdraw whenever. Not sure about this take

 

[irrationalogydotcom]

@lachjames Yes, but technically at anytime the bank in their T&Cs have the right to hold back any money in the redraw (it is technically thiers), but that is not the case with an offset it is technically yours.

 

[adreanbw]

@irrationalogydotcom They can do it with any money you have in that bank. Every loan doc will say ‘at any time we can use any credit, to pay for any debit you have with us… we can give notice and all debt is due payable wether the loan term is up or not’.