It’s one of the less talked about home loan options, but a redraw facility can be a benefits. Here’s why:
What’s a redraw facility?
A redraw facility lets you make extra repayments or add extra money into your loan and redraw it at any time as long as the minimum repayments have been already made.
This means that any extra money you can save can be added into your home loan account and while is there, reduce the loan amount; so you can pay off your loan faster!
Most lenders offer a redraw facility although it’s not available on construction loans and some lenders even allow it on fixed rate loans.
You can choose to redraw funds when you need them, use it as your savings account while saving for a family holiday or a new car or just make extra house payments.
You can keep track of your available redraw amount by calculating the difference between what you’ve paid in as extra payments and how much your usual repayments for that period are, less one month’s scheduled repayment.
Depending on how you have set up your loan, you may be able to have reduced loan repayments as they could be based on the lower loan amount.
How can I access the redraw amount?
You can use your online loan access to see your available redraw amount at any time or call your lender’s customer service team and ask them to check it for you.
Some lenders give you access via the ATM network but there may be associated fees and charges or minimum redraw amounts.
What happens after I redraw funds?
After you have redrawn money from your home loan, you will then have a larger loan amount and the repayments will likely increase accordingly due to increased interest.
What are the benefits of a redraw facility?
Just like an offset account, a redraw facility can help by reducing the total interest paid on your loan and shorten the life of your loan with the added option of allowing you to use the extra money if you need.
When comparing loans and choosing the option that best suits you and your financial needs, ask me which lenders offer a redraw facility.