What are the benefits of a redraw facility?
Allows you to make extra loan repayments
These help to reduce your loan balance and can save you thousands in interest over the life of your loan.
Allows you to access the extra repayments you've made
You can access additional repayments you’ve made on your loan, providing flexibility if you need the funds. However, redraw limits may apply.
Gives you control over your money
You retain control over your money while reducing debt, helping you manage loan repayments and finances more efficiently.
A redraw in action
If, for example, you had a $500,000 loan with a 30-year loan term, on an interest rate of 8% p.a., your monthly repayments would be $3668.82.
If, three years into your loan, you started paying an extra $200 a month in repayments, above the minimum required amount, you could:
-
Save $128,343 in payments over the life of your loan
-
Reduce your loan term by 4 years and 1 month
Be mindful of interest rate changes
When you make extra repayments on your mortgage and interest rates increase, so too does your savings potential. In a high-rate environment, every dollar in redraw works harder. When interest rates decrease, you still save money on interest, just less per dollar.
What are the conditions and the limitations?
While redraw facilities offer flexibility, you need to be aware of some the following conditions and limitations including:
Loan repayments
Importantly, ensure your loan repayments are up to date
Fees on redraws
A $25 fee applies for requesting redraws via written forms. Redraw requests via RedZed Connect incur no fee.
Accessing available redraw funds
When you choose to access any extra repayments sitting in your redraw, your principal goes back up by the amount you redraw.
Redraw and accessing funds
Only the extra repayments you make go into your redraw facility — not your regular loan repayments. Any extra payments into your redraw must be made from the same account your loan repayments come out of.
Impacts of accessing redraw funds
If you choose to access the extra repayments you've made on your loan, be mindful that your daily interest cost will increase, increasing the total interest you'll pay over the life of the loan.
Refer to your T&Cs for guidance
For more details, refer to your loan offer and terms and conditions.
Key takeaways for managing your redraw.
- Be strategic when accessing your redraw.
- Use RedZed Connect to keep track of your redraw balance.
- Keep fees in mind when accessing your redraw.
- Try and replenish your redraw balance when possible.
To get started review your loan terms to confirm that it includes a redraw option. Then, you can submit a redraw request through your RedZed Connect account.
What next?
If you have any questions or would like further assistance, contact our Client Services team.
Don’t stop now, there’s more!
You’ve started strong, keep the momentum going with more handy tips and insights below.
What factors determine the amount of interest you pay?
Learn about interest - what it is, how it's calculated, and the different ways you can reduce your daily interest charges.
What is an interest-only loan?
With an interest-only loan, you can nominate a set period where you only pay the interest on the amount you’ve borrowed.
What is an offset sub-account?
An offset sub-account is a separate account linked to your home loan, where extra repayments help reduce the interest you pay by offsetting your loan balance.