An offset account is an everyday bank account that is linked to your property finance facility. The funds in this account offset the Ijara that you are charged on your loan balance.
For example, if you have a loan of $250k and have $50k in the offset account, Ijara will only be charged on the balance of $200k ($250k - $50k).
In the case of a redraw facility, if you’ve made additional payments into your home finance facility, it means you’ll have money available to take back out of your finance facility if you want to. This process is known as redraw. If your monthly repayment is $2,000 and you pay $2,500, the extra $500 becomes available to you in the redraw facility. You can later access that $500 if needed.
Summary:
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Offset Facility: Reduces Ijara charged on your loan based on the balance in a separate account. It offers flexibility in managing cash flow. Total monthly payments remain the same, however Ijara repayments reduce and going towards principle repayments.
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Redraw Facility: Allows you to access extra loan repayments made on top of required repayments, giving you access to your funds while still reducing Ijara on the loan.
Offset and redraw do not apply to Hejaz vehicle, business, and development finance.