A home loan redraw facility allows you to redraw any additional repayments you have made on your loan. Making additional repayments on your loan reduces the loan balance, meaning you save money on the amount of interest your paying.

Many variable home loans come with a redraw facility, it’s not available, though, on construction loans and only some lenders allow redraw on a fixed rate loan. It’s certainly a great facility if you have extra income that you can put on your home loan.

Your extra funds can be withdrawn if and when you need them, or you can keep the funds in your home loan to pay off your principal faster. While drawing on these funds will reduce the benefit of paying more than you’re required to, having an additional cash at your disposal can be a godsend when your financial circumstances unexpectedly change.

Accessing redraw

Your internet banking will show your available redraw amount at any time and you should be able to transfer the funds easily to another bank account or withdraw them via an ATM. Alternatively, you can call your home loan customer care team and ask them to check for you. It is important to know if there are any term & conditions associated with your redraw such as minimum or maximum redraw amounts and if there are any fees associated with redrawing funds.

What happens after using redraw?

After you redraw money from your home loan, you continue to make your regular repayments as normal. You do need to be aware that 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 will 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. Generally the amount of interest you save on your home loan will be higher than any interest you will earn having the additional money sat in a savings account. Depending on your loan and lender, additional payments can be made at no extra cost and redraw funds can be accessed at any time. It’s important to discuss both additional repayment facilities and redraw facilities with your Mortgage Broker to ensure you understand what you will be able to do and if there are any restrictions or fees associated with these facilities.


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