Loan Essentials
March 2025
Managing your home loan well can give you more flexibility and help you pay off your mortgage sooner. A redraw facility could be one way to reduce interest costs while still having access to extra funds when you need them. Here’s what you need to know.
What is a redraw facility?
A redraw facility lets you access any extra repayments you’ve made on your home loan. Instead of those funds simply reducing your loan balance, you can withdraw them later if needed.
How does a redraw facility work?
Say your minimum mortgage repayment is $3,600 a month, but you regularly pay $3,800. After a year, you’d have $2,400 in extra repayments. If an unexpected expense comes up – like urgent home repairs – you can redraw some or all of that extra money from your loan.
Benefits of a redraw facility
- Every extra repayment reduces your loan balance, which means paying less interest over the life of the loan.
- Redraw facilities let you manage your cash flow, providing convenient access to extra funds when needed without relying on high-interest loans or credit cards.
- Redrawing funds is usually straightforward through online banking or by contacting your lender.
Things to keep in mind
While redraw facilities offer flexibility, here are a few things to consider:
- Some lenders may charge a fee each time you redraw, or place limits on minimum or maximum amounts.
- Not all mortgages come with a redraw facility, and conditions can vary significantly between lenders.
- Withdrawing funds increases your loan balance, which could result in paying more interest over time compared to leaving the funds untouched.
Redraw vs offset accounts
While offset accounts and redraw facilities both help reduce interest costs, they serve different purposes. Offset accounts can be beneficial for keeping savings readily available, whereas redraw facilities provide straightforward access to extra repayments. A redraw facility might suit you best if you prefer simplicity and don’t need regular access to extra funds.
Ready to make your mortgage work smarter?
Having the right loan features for you can make a big difference in managing your mortgage and keeping costs down. If you’d like to understand how a redraw facility could work for you, let’s chat.
Get in touch today to explore your options.
