Flourish Health & Wellbeing eMag - Latest Edition - Flipbook - Page 48
If you have
a mortgage:
What a rate rise
really changes
1) Your repayment
amount: If you are on
a variable rate, a rise
usually means your
repayment goes up
(unless your lender
holds rates, which is
less common when
changes are bigger or
persistent).
2) Your interest
cost over time:
Higher rates mean a
larger share of each
repayment goes to
interest rather than
principal, especially
in the early years of
a loan.
3) Your buffer
matters more: When
rates rise, your
昀椀nancial buffer
is what stops stress
turning into crisis.
That buffer can be
cash in an offset,
funds available in
redraw, or savings in
a separate account.
Offset vs redraw:
The two tools Australians often mix up
Both offset accounts and redraw can reduce
interest, but they work differently, and the
differences matter when life happens.
OFFSET ACCOUNT
• A transaction account linked to your
mortgage
• The money in the offset reduces the
balance your interest is calculated on
• Useful for 昀氀exibility, and commonly
preferred if you need your cash
accessible day to day
ASIC’s Moneysmart explains offset accounts
and redraw as common home loan features
that can help reduce interest, but may come
with costs, so you should weigh whether you
will use them.
REDRAW FACILITY
• Lets you access extra repayments you
have already made on your loan
• Usually not a separate account, it is a
feature inside the loan
Moneysmart outlines redraw as access to
extra money you have deposited into your
home loan.
Practical tip: If you are the kind of
person who likes a clean system and
keeps savings separate, an offset can
feel simpler. If you are focused on paying
the loan down aggressively and you
do not need frequent access to extra
repayments, redraw can be effective.
Some loans offer both.
