LOAN REDRAW – MAKING YOUR MONEY WORK FOR YOU.





If you have a redraw facility with your loan you can access these monies at any time.


Some variable rate loans allow you make extra repayments/ deposits into the loan.


Those extra funds deposited save you in interest charges, as your loan balance is reduced. Banks charge interest on your loan balance.




How it works

It operates much like a bank account, where you withdraw to spend and deposit to save.


The added benefit is that any savings – (extra repayments you make) – help reduce your principal loan amount which means your interest charges are reduced too.


With a home loan redraw facility, you can redraw funds when you need them, or keep them in your home loan to pay off your principal loan faster.


Generally, the amount available for redraw is the difference between the extra amount you’ve paid and the amount you were required to pay.


Depending on your lender, you may be able to withdraw funds from an ATM, transfer to another accessible account, or pay bills online.


But it’s important you check with your lender about the cost of fees that may be charged using the redraw in this way, as well as the restrictions on minimum and maximum redraw amounts.



Benefits of a redraw



1. Extra repayments reduce your interest


Much like an offset account, making extra repayments into your redraw home loan account on top of your required repayment amount reduces the total interest you’re charged on your loan, and shortens the life of your loan.


2. Money when you need it


A redraw facility is a great way to put aside a little extra money each month for an emergency fund – while saving on interest charges at the same time. It means more flexibility with your mortgage, allowing you to spend and save as you need to.



Downsides of a redraw


While there are benefits to this type of home loan facility, it’s important you’re clear on what the downsides are too.



Rules about redraw


1. Lenders have different rules about accessing your redraw.


Some stipulate a minimum or maximum redraw amount, or they may charge fees for withdrawals which can make it expensive.


2. Not the same as an offset account


While a redraw facility is similar to an offset account – whereby you put money into the account and your interest charges are reduced – the money in your offset account remains yours to spend or save as you choose, rather than being limited by the lender’s restrictions.



Get a home loan with a redraw. If you’re switching your home loan, you should consider if the new loan type has a redraw facility.


We can help, so contact us today to find out more.