Handling Offset and Redraw Accounts in YNAB


I’m Ian, one of the YNAB development team. Nice to meet you!

Jesse has asked me to explain how to use YNAB to handle some mortgage situations that occur frequently here in Australia, but aren’t quite so common in other parts of the world. Specifically, how to deal with mortgage offset accounts and mortgages with redraw facilities. My wife and I bought a house in the Blue Mountains (in New South Wales roughly an hour and a half west of Sydney) about five years ago. Our home loan had an offset account attached to it, and after we refinanced in 2011 we found ourselves instead with a redraw facility as part of our loan. So I’ve dealt with both of these in my own budget and can (hopefully) explain how I’ve dealt with them in the YNAB software. Both of these account types provide a way for you to pay down your mortgage more quickly, while at the same time maintaining access to your money if you really need it (which is handy).

Offset Accounts

Offset accounts are a transaction (“checking” for our US-based friends) account that is linked with a mortgage so that when interest is calculated on the mortgage, the balance of the account is offset against the principal of the loan. This means the higher the balance you have in your transaction account, the less interest you pay. So the goal is to keep that balance as high as you can. The good thing about offset accounts is that they are very easy to manage in YNAB – they are simply a standard checking account. So, you don’t need to do anything differently to how you would normally use YNAB. Build up your category balances for rainy day funds and the like, and just leave that money in the account. If you want to, you can create an “offset funds” budget category, and budget money into that, which means that you will be building up extra padding in your account and as long as you spend according to your categories (and not your balance) your loan interest will decrease. You budget your regular mortgage payments as usual, using a regular budget category.

To represent the actual loan in YNAB, you can add that as an off-budget loan account if you want to see it being paid down over time, in which case your payments are a transfer from the offset account to the mortgage account, categorised using your mortgage payment category (because money is leaving your budget). When you receive your statement, you can add the interest as an outflow from the mortgage account.

If you don’t want to see the mortgage itself in YNAB, it’s even easier – all you need to do is create a mortgage budget category, and make an outflow with that category each time you make a payment. Fair dinkum**, it’s that simple!

Redraw Facilities

Having a redraw facility attached to your loan allows you to pay extra into your home loan and then redraw that money at a later date. This can either work by allowing you to transfer the money back out to another (pre-specified) account, or may allow you to spend directly from the home loan account. Unfortunately, managing redraws in YNAB is slightly more complicated than the ease of offset accounts.

The reason for the complication is because a redraw account is both a budget account and an off-budget account. At the same time. Unfortunately we don’t have anything built into YNAB to handle this sort of craziness, so for now we have to deal with it manually. And that means we need two accounts in YNAB to represent the single real-world account.

The first account is the actual mortgage account, created off-budget, with the starting balance equal to whatever remains on the loan (not including any funds in the redraw portion of the loan account). I’m going to use some easy numbers for examples here, so it’s easier to see what’s going on. In this instance, we’ll say we have a mortgage for $100,000 (I wish my mortgage was only for $100,000, but houses are expensive Down Under***).

The second account is the redraw portion of the loan account. It is created as a checking account, with a starting balance of whatever funds are available to redraw. For this example, we’ll say we have $20,000 extra that we have paid into the loan. This could be from a combination of rainy day funds, extra payments, and using the loan instead of a savings account. Personally, I put the bulk of my pay into this redraw account, and pay my credit card and the other bills from there.  At this point, we have two accounts in YNAB representing our home loan. When the two balances are combined, they total $80,000 remaining on the loan, but we can access $20,000 if we want to.

At this point we can actually start spending from the redraw portion, as well as paying down our home loan. My loan provider won’t let me pay the mortgage from the redraw portion, so I have to maintain another transaction account in order to pay off the home loan.

It should look something like this on the sidebar:


When we look at our loan statement, it will say that we have a balance of $80,000, because the two home loan accounts in YNAB are combined in Real Life™. Shown below are a series of transactions as an example of how to represent spending. Payments for the home loan are transfers to the off-budget portion of the loan (again with a category, because money is leaving your budget). Interest on the home loan is added as a standard transaction. All other payments come and go from the redraw portion of the loan.


As you can see, I got paid into the home loan**** and paid for my credit card from the redraw portion of the loan account, as this money hasn’t explicitly been used to pay down the loan. The monthly payment went to the non-redraw portion of the account, and interest was applied there as well, because those are directly applied to the loan itself.

The sidebar now looks like this:


You may have noticed that I had flagged all the home loan transactions with the same colour***** flag. I do this so I can reconcile the account. Reconciling in YNAB only works on a single account, so we have to manually ensure these combined numbers are correct and then we can lock down the individual portions. By giving all transactions in the two home loan accounts the same flag, it makes it easy to filter. So, going with a statement on 4/3/2013******, we can change to All Accounts and set the filter to the following: redraw4

At this point we can confirm that the statement date of 4/3/13 and loan balance of $79,600 to pay is correct by looking at the total in the footer. If we are missing a transaction, we can just add it here directly (making sure to flag it the same colour), and if we need to unclear some of the transactions to match the statement, we can confirm the total is still correct by adding “Is: Cleared” to the search filter.

Once we are sure our total matches the statement, we can reconcile the two YNAB accounts separately by making sure every transaction after the statement date is uncleared, and then clicking “Reconcile Account” and entering the statement date. The cleared total is automatically set there, so we can just click “Finish Reconciliation”, and we’re done!

That’s it!

As you can see, it is a little more complicated to handle a redraw account, but after reconciling once or twice, it gets much faster to manage. It takes me considerably less time to reconcile our home loan than it took for me to write up how I manage it.

Thanks for joining me on this little excursion into Australian home loan features and how to manage them in YNAB!




*I have to say that because I’m Australian, and it’s written into our constitution that all international communications have to begin with “g’day” on pain of capital punishment.

** This isn’t in our constitution, but I say it here to re-establish my antipodean credentials

*** We never actually say “Down Under” in Australia

**** My pay for March hasn’t cleared yet, but I have a full buffer, so I’m ok

***** There is a “u” in there. “Co-lor” sounds like a B-movie alien invader name

****** That’s March 4th, not April 3rd

31 Responses to “Handling Offset and Redraw Accounts in YNAB”

  1. Bea

    Fantastic post, really useful. I think this post may be the tipping point to use YNAB for most of my friends/family.

    • Ian Tyrrell

      Thanks Bea,
      Glad you found it useful!
      The offset part is pretty simple, but it sounds like it will be complicated, which puts a lot of people off. Redraw accounts are a lot trickier – took me a while to figure out how I was going to do it!

  2. Taren

    Great post. I don’t have a home loan (but I’m sure I will one day), but when I was looking over my mum’s the other day I was wondering how all of that would get entered into YNAB. I think this solves it. Nice to know there are Aussies working on YNAB, too.

    • Ian Tyrrell

      Thanks Taren,
      Redraw accounts in particular are a bit tricky.
      It takes a little while the first few times you try to reconcile, but after that it speeds up considerably.

  3. Kristy

    Thank you for your post. I have been using YNAB since March 2013 and love it. I live in Orange, NSW Australia and my home loan does have a offset account. Thank you for explaining the best way to manage this.

    Love YNAB. I think my husband is sick of me reminding him to keep receipts.

    • Ian Tyrrell

      You’re welcome!
      My wife gets a little frustrated too when I ask her if she’s entered her transactions yet :)

  4. Murray

    Hey Ian (Aussie here too). I’d like to know how to show an Offset account which accurately shows in the Budget categories. Currently even though I budget every dollar (in the budgetted column) not every dollar appears in the outflows because the money does not move. This throws-out my reports because it appears that I am not allocating money into an Off-Budget account and so doesn’t appear as an outflow.

    eg. income of $3000 (for the month) and spend $2000 (including transfers to off-budget accounts). I now have $1000 that I am saving in my Offset account (which is my regular transaction account). If I go to the Reports tab (Spending by Category) the total for the donut chart is $2,000 and not $3,000. The software doesn’t recognise that I have NotSpent the $1,000 and so doesn’t show it at all.

    • Ian Tyrrell

      Hi Murray,
      That extra money won’t show up in the spending reports because you aren’t spending it – you’re just leaving it to sit in the offset account.

      If you are planning on leaving it sitting in the offset account to reduce your interest payments, then you need to tell YNAB that its job is just to sit there. To do that you need to make a category (maybe “Interest reduction” or something), and assign any excess money to that category. Then you know not to spend that money, as it has been given a specific job to do.


  5. Tim Webb

    Hey Ian,

    Fellow Aussie here. Really appreciated this post, however I’m still struggling to understand YNAB with my particular homeloan setup. I have a redraw option on my loan, but I also have a 10 year interest only option applied, so I’m not paying principal at the moment, but I am reducing interest payments buy stashing all my income etc into the redraw portion of the home loan (on-budget redraw account in YNAB). I’ve assigned a budget category called “Mortgage: Principal” to force myself to put what I should be paying aside so as to not be kidding myself as to how much money I really have available to redraw :)

    To pay monthly interest, I have to move money from my redraw account, to my transactional account, and the bank claims the interest I owe from the transactional account.

    This is my setup in YNAB: (figures relate to your example):

    Homeloan: -$100,000 (total amount of loan)
    redraw: $20,000

    So to pay interest with YNAB, i’d have to move $100 from redraw to transactional account, and then I’d have to enter the banks claim on that interest as -$100 in the transactional account and give it a category of “Mortgage: Interest”.

    Is this the right/best practice?

    • Ian Tyrrell

      Hi Tim,
      That sounds pretty close to what I do (although I just leave enough in the transaction account to cover the mortgage payments, rather than having to juggle money around – that’s just asking for problems if something goes wrong).

  6. Shayne Hope

    Hi Ian, I have a CBA viridian home loan. I’m guessing this is treated as the redraw example. I’ve been trying tog et my head around how I would set up YNAB for this and your post has helped me alot!

  7. AnnaeM

    HI Ian, Long time Aussie YNAB user here, just about to refinance and change to a different mortgage/offset/redraw structure and so was hunting around the forum for guidance and came across your article. This is brilliant. Thank you. I’ll get it all set up in YNAB beautifully just in time for the new financial year!

  8. Gra

    Hi, another Aussie YNAB user here. I have setup the offset account as you describe here. The issue I have now is in the Android app my Budget amount includes the money that is offsetting my mortgage and so it is showing a large figure. Really, I only want to see the money I have left that I’ve budgeted for this month. Is that possible please?


    • Ian Tyrrell

      G’day Gra,
      I’ll pass this on to the Android guys, but I’m not sure there’s anything you can really do about it right now.


  9. Sonya

    Hi Ian
    I just ask questions and received the link for this post.
    My loan is a LOC with no offset account, but your recommendations still work for me. This what I was trying to explain on the forum.
    So a big thanks to you and budget ninja – for your time and willingness to help others

  10. Kerryn

    Hey Ian a fellow Mountains dweller here, Just starting with Ynab and this is my next challengne to set up my redraw as savings :-) this will help heaps.

  11. page

    This is a great article. I thought I had it figured out on my end until it came time to reconcile. I set up the on-budget account for my draw portion of my mortgage, and the off-budget accound for the balance due on the loan.

    Where I really get snagged is the way my bank has made me set this up. Instead of being able to draw directly from the mortgage (line of credit) I have to ask them for a transfer into a checking account at their bank. Then the money is available. So, as a result, I’ve got a 3rd account set up in YNAB for that checking account, and it is off budget as well.

    I feel like I’m getting overly complicated with recording the transactions, and they are definitely messing with my budget numbers.

    • Ian Tyrrell

      Hi Page,
      by the sounds of things that checking account should probably be on budget, as that’s where you finally spend from. Moving money from the (on-budget) portion of the mortgage to the checking account would just be listed in YNAB as a transfer with no category.

  12. BarossaOzMudgy

    Awesome. When I started YNAB 3 years ago, I had an available balance in a redraw account and had tremendous trouble managing it. With our move, I have a redraw account but hadn’t used it due to it being too complex. I have only just transferred a simple figure of $1K to it but would like to get back to having our pay deposited into and using it for a few cash transfers. This will help.

    Added to that – 1. Had never noticed the Reconcile Account button before! Searched on Support and found how to do it.
    2. Have not been sure what to use the flags for so will look into that too.

    Many thanks, Ian.

  13. Chrys

    Aaagh, getting out of control with the mortgage part of our accounts! We have a cashback facility, which is different again. I can put extra on the home loan, and this reduces the interest. I can withdraw amounts of a minimum $1000 at a time. I only like to do this once a month, as it attracts a $20 fee if I make any more transactions. So it’s not a redraw facility as such. I don’t want the cashback amount (say $3000) put ‘On Budget’ accounts as it makes the money available to the budget – but we *do not* want to spend this money, but keep it on the mortgage to keep the interest down. What to do? I am pulling my hair out!

    • Ian Tyrrell

      Hi Chrys,
      There’s two ways of doing this:
      1 – keep the whole account off-budget, but make the transfer once a month, and mark that as income.
      2 – keep the on-budget section, but budget all but $1000 to a “DO NOT TOUCH” category (or something like that).


  14. Paul

    I have done something similar but on a personal loan. I have recently found myself come unstuck from the way I have set it up originally.

    When i took the loan out I marked the credit as income for that month and assigned it to a debit category which i also added money on top of the category when I get paid for the payments required during that pay cycle.

    Since taking out the loan I have refinanced and this is where it comes unstuck! I never kept the YNAB redraw account up to date to reflect the available redraw on the account with the bank and I haven’t added the payout transactions because i don’t know which account to payout in YNAB as its not true and correct.

    So I might have to go through all my statements and compare the redraw and loan amounts to get it on track. I probably have to adjust the category balance when the new loans took over.

    What a mess i got myself into lol

  15. Judd

    We’ve got an Aussie redraw-type loan and I’ve been racking my brain to think about how your method would work with our situation.

    We’ve got a regular transaction account and a variable-rate redraw-type loan. Currently, our salaries go into the transaction account and then we’re paying more than the minimum monthly repayment into the loan from that account.

    The only way I can think of doing it is to do a split on the monthly payment so that some portion goes to the loan off-budget account (i.e. whatever the minimum repayment for the loan at that point in time) and some portion allocated to the redraw on-budget account (i.e. the rest). (Any bonus/additional payments on top of this would just go straight into the redraw on-budget account.)

    Problem with this is then reconciling isn’t as straight forward and needs a bit of stuffing around. Am I missing something or is that the only way to handle a situation like that?

    BTW, thanks for the post :-)

    • Ian Tyrrell

      Hi Judd,
      That sounds about right with the split transaction. It does depend on how your specific accounts work. My lender insists on having the official payments be a direct debit from my transaction account. Any extra payments that I make (which is the bulk of my pay) are then considered to be purely redraw.
      If your bank allows you to just overpay your minimum payments, then you’ll need to split the transaction into two transfers like you’ve suggested. This won’t complicate the reconciliation any more than it already is though, as you still need to combine the full amount of the redraw and main portion of your loans to reconcile correctly.


      • Judd

        Thanks for your reply Ian. Good to know on the right track.

  16. Gary

    Hi Ian, I’m new to YNAB and have a redraw facility here in Australia too. When I do as you suggest, I end up with a stack of money to budget (the redraw amount), which I’m not sure what to do with. How do I handle that?

    • Ian Tyrrell

      Hi Gary,
      The money is available to budget in YNAB, because it really is available for you to budget :) You can assign it to any category you want – if that money is planned for a particular purpose, create a category and put it there.

      If you just want it to stay on the mortgage and not get spent ever, then create a “mortgage paydown” category and budget the extra money towards that. If you want it to be right out of view so you don’t think about it at all, you can hide that category so you don’t see that money as being available (although, if you need it, it always is).


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