When considering how secure your money will be, it’s important to remember that offset and redraw features involve using your cash in very different ways.

With offset, you hold onto your savings in a separate deposit account. With redraw, you pay extra on your loan to reduce your debt, but you can access that money again if you need it. However, a redraw facility is not a deposit account, meaning that money is not protected in the same way.

Here’s how financial services regulator APRA explains it:

'Mortgage offset accounts that are separate deposit accounts are covered under the FCS [Financial Claims Scheme]. However, mortgage accounts with redraw facilities that are not separate deposit accounts are not covered by the FCS.'

The Financial Claims Scheme covers customers for up to $250,000 per person per institution on money deposited with an authorised deposit-taking institution (ADI). That means if you have up to $250,000 in an offset account and your bank goes bust, the government will guarantee that money provided its held with or backed by an ADI.

Most home loan providers either are an ADI themselves or their offset accounts are backed by one, meaning you would also be covered. Check this with the lender or your mortgage broker if you’re unsure.

In the case of redraw, you can’t ‘lose’ the money you have made in extra repayments. But there is a small risk it could be fully absorbed into your loan (e.g. if you stopped repaying your loan), meaning you would no longer be able to access the money.

As Rebecca explains, “it's not going to leave you with a loan and no money – it's going to leave you with a smaller loan".

Yes, some home loans (usually variable rate ones) offer both an offset account and the ability to make extra repayments and then redraw them.

That would mean a borrower could make extra repayments on their loan to reduce their debt, while also keeping their savings and other cash on hand in an offset account to reduce their interest bill.