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How your home loan redraw facility can help you

20 Sep 2021

Having the ability to redraw extra money you have deposited into your home loan is great because it gives you the flexibility to put more towards your loan when you have cash available, while still being able to access your extra repayments if you need to. But when is the best time to use your redraw and what for?

 

We sat down with our Lending Support Manager, Jackie Tipper to find out.

 

Firstly, what is a home loan redraw facility?

A redraw facility allows you to access any extra repayments you’ve made on your home loan above the required minimum repayments.

It’s a feature that’s available with eligible variable and fixed rate home loans (usually with limitations on how much extra you can deposit each year with fixed).

Why get a redraw?

There are quite a few benefits of having a redraw, including:

  • The extra money sitting in your redraw can reduce the balance owing on your home loan and how much interest you pay.
  • You should be able to save more money in interest by paying extra into your home loan than you would if you kept the same funds in a savings account – as home loan interest rates are usually higher than savings account interest rates.
  • You don’t have to pay tax on the interest you’ve saved from having money in your redraw like you would with a savings account. See the ATO for more information.
  • Lastly, it gives you easy access to any extra money you’ve put towards your home loan, to use as you need. For example, if you’ve made $10,000 worth of extra repayments, you can withdraw this amount to use however you like.

How much can I redraw?

We allow you to access whatever extra money you have deposited on top of your required repayments as long as it’s more than $500.

However, some other lenders have a maximum amount you can redraw irrespective of the additional repayments you’ve made.

How many times can I redraw annually?

We don’t have any limits around how many times you can redraw your extra repayments as long as you redraw more than $500 at a time.

However, some other lenders may have limitations around how many times you can redraw each year and how much money you can redraw at once.

Will I be charged a fee to use my redraw?

We don’t charge you any fees to use your redraw facility.

However, some other lenders may charge you for redrawing your extra repayments, particularly for withdrawals made in a branch.

So, when is the best time to use my redraw and what for?

Well, there’s not really a ‘best time’ to use your redraw facility as such, because it’s usually a good idea to put more towards your home loan if you can. But, there may be certain situations where you might want to use money from your redraw.

Withdrawing a lump sum to buy a car or renovate your property

Using money from your redraw to buy a car or to renovate your property could be a better option for you than taking out a personal loan, where you would have to pay interest and try to manage more repayments. This isn’t the case for everyone though, so make sure you speak to your lender about what is best for your situation.

Taking a repayment holiday

If you need to take a break (repayment holiday) from upcoming scheduled mortgage repayments, you may be able to do this by using the extra repayments you have stashed away. Get in touch with us and we can help run through your options with you.

Just remember that not all lenders will offer repayment holidays, or they may have different rules around time frames etc.

Emergencies

Sometimes life can throw you unexpected and expensive curveballs. You might get an unexpected bill, or your car might need an expensive part. Whatever the case is, using money from your redraw facility to help with these emergencies may be a better option than whacking it on your credit card, or awkwardly asking for a loan from family or friends. Again, it’s always best to speak with your lender to see what option is best for you. 

How can I use my redraw facility?

It’s super easy to use your redraw facility with us. All you need to do is log into your Internet Banking or Mobile Banking App and transfer money from your Home Loan account into one of your active accounts such as your ‘Access Account’. Just remember you will have to transfer a minimum of $500 at a time.

If you don’t have Internet Banking or our Mobile Banking App, call us on (08) 8202 7777 and we can help you.

It’s important to note that other lenders may have different processes around accessing redraw money, such as manually filling in a request form on their website or via email.

In conclusion  

Whether you have $20 or $20,000 sitting in your redraw, it will reduce the balance owing on your home loan. This means you’ll be paying less interest on your home loan, which is always a good thing. But there may be times where using your redraw is a better option than taking out an additional loan or borrowing money from family or friends. Ultimately the decision should be based on your own financial goals and needs.

Our lending experts can always help talk through your options. Call us on (08) 8202 7777 or visit us at 400 King William Street, Adelaide between 8am – 8pm weekdays or 8am – 2pm Saturdays. We’re here to help!