Slowly, but surely the truth about redraw v offsets will be explained to borrowers

The main issue I see is that redraws and off-sets are often mentioned in the same breath, so many people tend to bracket them together and treat them as the two sides of the same coin.

In reality, they are totally different.

The offset account is simply a bank account. Its only tie is that it does not pay interest, instead reduces interest on the attached loan. You have full control.

A redraw facility is part of the mortgage, control is shared by you and the bank. And the bank has the upper hand.
Marg

 

That is concerning and often overlooked, I've heard many clients say "redraw is the same as offset" - once educated on the subject they much prefer the offset option

 

Yea this offset vs redraw seems to be a common misconception...which is why I did a video with whiteboard on this to make it easier to visualize for people:


And nowadays I just flick the link through to my client and they usually go "OK I get it now"

Cheers,
David

 

The very names help to explain the purpose.

Not all knives are sharp. Not all lighthouses are bright

 

And not all offset accounts are offset accounts!

 

Terry can you please elaborate?

 

Some institutions have redraw facilities labelled as offsets. Non bank financial institutions usually.

 

Had a broker once tell me that there is no worthwhile difference between Offset and Redraw . He also frowned at the idea of IO loans in general... It was a very short first/last meeting after that.

 

Please elaborate

 

Thanks Rolf,
Is refinance an option then? if one can that is

 

Is there an interest rate differential between redraw and offset? Surely you pay more for the offset flexibility?

 

no

 

well, some of the non bank lenders cannot offer offsets and they may have a cheaper rate than most banks so 'perhaps, depending on the lender' should be the answer.

 

Given

I haven't used a lender yet where a form is required to redraw although I'm sure they do exist. Great video nonetheless as it clearly articulates the difference between the two.


@Rolf Latham or any other broker veterans - have you had a case where a client has been unable to access their redraw outside of being in arrears/discharging a security? Ignoring the tax implications, if a bank wants your money than surely they can take it from your offset account due to the all moneys clause?

 

Thanks Rolf.

Have you had any clients lose access to redraw on regular P&I loans that weren't in default/being reassessed?