What Is a Redraw Facility?
A redraw facility can give eligible home loan borrowers access to extra repayments they have already made on their mortgage.
Instead of letting those additional repayments simply disappear into the loan, a redraw feature may allow you to access some of those funds later, subject to your lender's rules and conditions.
Think of It as Access to Extra Repayments
The key idea is simple: if you have paid more than your required home loan repayments, some lenders may allow you to access eligible additional repayments through a redraw facility.
You Pay Extra
You make additional repayments above your scheduled home loan amount.
Your Loan Balance Falls
Extra repayments can reduce the outstanding balance and may reduce the interest charged.
You May Redraw
If your loan allows it, you may be able to access eligible extra repayments when needed.
How Does a Redraw Facility Work?
Imagine your required monthly repayment is $3,000, but you choose to pay $3,500. The additional $500 goes towards reducing your home loan balance.
Over time, these additional repayments can build up. If your lender provides a redraw facility, you may be able to access eligible extra repayments, depending on the loan's terms and conditions.
Put Extra Money Towards Your Mortgage
Additional repayments can help reduce your outstanding loan balance. A redraw facility may then provide a way to access eligible extra repayments later, subject to your lender's policy.
Your Extra Repayments Can Build Over Time
Paying a little more than your required repayment can gradually increase the amount you may be eligible to redraw. The exact amount available and access conditions depend on your lender.
Why Might Homeowners Use a Redraw Facility?
A redraw facility can provide flexibility for borrowers who have made additional repayments and later need access to some of those funds.
Redraw Is Linked Directly to Your Home Loan
Unlike a normal savings account, the money has already been paid into your mortgage. Accessing it can therefore change your outstanding loan balance.
Redraw Facility vs Your Regular Savings Account
Although both can give you access to money, they work differently. Money placed into a savings account remains separate from your mortgage, while additional mortgage repayments reduce your loan balance.
A redraw facility is connected to your home loan, so accessing the money can affect the amount of debt and interest you pay.
Check Your Lender's Rules
Redraw facilities are not identical across all Australian home loans. Some lenders may have minimum withdrawal amounts, transaction limits, fees, processing conditions or restrictions. Always check the specific terms of your loan.
What Should You Consider Before Redrawing?
Accessing money from your redraw facility effectively increases the amount outstanding on your home loan again. That can affect the interest you pay and the time it takes to repay the loan.
A Redraw Facility Can Add Flexibility — But It Is Still Your Home Loan
A redraw facility can be useful when you have made additional mortgage repayments and need access to eligible funds. However, withdrawing those funds can increase your outstanding loan balance again.
Before using redraw, consider your financial goals, the purpose of the withdrawal and the specific conditions attached to your home loan.