How a Redraw Facility Can Help You

March 19, 2025

How a Redraw Facility Can Help You and Your Home Loan

Managing your home loan wisely can save you money and provide greater financial flexibility. Moreover, a redraw facility is an excellent way to reduce interest costs while still having access to extra funds when needed. In this blog, we’ll explore the key points you need to know about having a redraw facility on your home loan account.

What is a Redraw Facility?

A redraw facility allows you to access any extra repayments you’ve made on your loan account. Instead of simply lowering your loan balance, those additional payments remain available for withdrawal if needed. This means you have more control over your finances while still reducing your loan balance.

How Does a Redraw Facility Work?

For instance, if your minimum monthly repayment is $3,800, but you choose to pay $4,000 instead, you will have contributed an extra $200 each month. Over time, this adds up to $2,400 in extra repayments. As a result, if you ever need those funds, you can withdraw (or “redraw”) that money from your loan. This flexibility can be especially useful during unexpected financial situations.

Benefits of a Redraw Facility

• Save on interest – Extra repayments reduce your loan balance, thereby lowering the total interest you pay over time.
• Flexible cash access – Withdraw funds when needed, which helps you avoid the need for high-interest credit cards or personal loans.
• Easy to use – Most lenders allow redraws via online banking or a simple request, making it convenient to access your extra repayments when required.

Things to Keep in Mind

• Some lenders charge fees or impose limits on how much you can redraw at a given time. Therefore, it’s important to check your loan terms before relying on this feature.
• Additionally, redrawing funds increases your loan balance, which means you may incur higher interest costs over time. Thus, using this facility wisely is key to maintaining long-term savings.

Redraw Facility vs. Offset Accounts

Both redraw facilities and offset accounts help reduce interest, but they function differently. Understanding these differences can help you choose the right option.

Offset Accounts

A separate account linked to your home loan, where savings reduce the loan balance and interest charged. Since the money remains separate, it provides more accessibility for daily expenses while still lowering interest.

Redraw Facilities

Extra repayments stored within the loan, allowing you to withdraw them if needed. However, access may not be as immediate as an offset account, depending on your lender’s terms.

Ultimately, if you don’t need regular access to extra funds, a redraw facility can be a simple and effective option. By weighing the pros and cons, you can determine which feature aligns best with your financial goals.

Want to Make Your Mortgage Work Smarter?

Choosing the right loan features can help you save money and stay in control. Therefore, if you’d like to see if a redraw facility is right for you, let’s chat! Contact the Connected Finance team at (02) 4288 8100.