A home loan redraw facility lets you access extra repayments you've made, offering flexibility without needing a new loan. It's a handy tool for funding renovations, unexpected expenses, or simply having a financial buffer. In this article, we’ll cover how it works and its benefits.
The redraw facility explained
A home loan redraw facility can be a flexible and powerful tool for managing your mortgage. It allows you to access extra repayments you've made on your loan, giving you the freedom to tap into those funds when needed without the hassle of applying for a new loan.
Whether you’re planning a renovation, covering unexpected expenses, or simply want a financial cushion, a redraw facility can help you make the most of your home loan. In this article, we’ll explore how redraw facilities work and whether they might be the right option for you.
Want to make extra payments without losing access to your money?
Great! A redraw facility lets you make additional repayments to reduce your variable rate home loan balance and save on interest. If you pay more than your minimum scheduled repayments, then you’ll have money available to redraw from your home loan.
You can redraw funds if, and when, they are needed, or you can keep the funds in your home loan to pay off your principal faster. The amount available for redraw is the difference between what you have paid and how much you were required to pay, less one month’s scheduled repayment.
For this reason, the redraw facility is a common feature of many home loans. It’s generally not available, however, on construction loans and only some lenders include it with fixed rate loans.
Accessing redraw funds
You can check your loan account online to view your available redraw amount at any time. Alternatively, you can call your home loan customer care team and ask them to check for you.
With some lenders, you can even withdraw funds via the ATM network. Be mindful that this may attract fees and come with restrictions on minimum amounts.
What happens after using redraw funds?
After you redraw money from your home loan, you continue to make your regular repayments as normal. However, be aware the interest component of the repayments you make will increase since you’re now paying interest on a higher loan principal amount.
What are the benefits?
Like an offset account, a redraw facility can help reduce the total interest paid on your loan and shorten the life of the loan. And, of course, when you need some cash it’s easily accessible.
Depending on your lender, additional payments can be made at no extra cost and redraw funds can be accessed at any time.
When comparing loans and choosing the option that best suits your financial needs, remember to consider the redraw facility.
Got a question? Call us any time on (02) 8313-8400 to discuss your needs
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