A redraw facility is a feature that allows you to withdraw any extra payments you’ve made on your home loan. Let’s say you have a home loan with a principal and interest repayment structure, and you’ve been making extra payments on top of your regular repayments. Over time, these extra payments can add up. 

There are two benefits that this has:

  1. You will reduce the total amount of interest you’ll pay over the life of your loan.
  2. You can access these additional payments and redraw them if you need the funds.

With a redraw facility, you can access these extra payments if you need to, such as for unexpected expenses or renovations. The amount you can withdraw will depend on how much extra you’ve paid and the terms of your loan, but it can be a useful way to access funds without having to take out a separate loan or increase your credit-card debt.

It’s important to note that there may be fees or restrictions associated with using a redraw facility, such as a minimum withdrawal amount or a limit on the number of withdrawals per year. Additionally, some lenders may require you to provide notice or request the withdrawal in advance, so it’s important to read the terms and conditions of your loan carefully and speak with your lender if you have any questions.

At Savage Money, we will take the time to go through your plans for now – when buying the house – but we’ll also talk about what you might want to be doing over the next few years – such as:

  • Starting a family
  • Travelling
  • Renovating
  • Moving

By understanding your plans, we can help you choose a loan that will grow with you as you need it.

Overall, a redraw facility can be a valuable feature for homeowners who want to reduce their interest costs and have access to extra funds if needed. However, it’s important to consider the potential fees and restrictions before signing up for a loan with a redraw facility and to use the feature responsibly to avoid increasing your debt.