What is a Redraw Facility on a Home Loan and how can it benefit you?

As we often say, most Australians with a mortgage take out a loan on a 30-year loan term and pay close, and sometimes more, than what they borrowed in interest.

What a lot of Australians are not aware of are home loan features that can really benefit them.

Redraw Facilities are one such benefit offered by many lenders and can be a great feature for those looking to pay off their home loan faster and lower the amount of interest paid.

So, what exactly is a Redraw Facility? It’s a facility that allows you to access additional repayments that you’ve made on your home loan over and above the minimum required repayments.

Additional repayments go straight towards paying down your home loan’s principal. Because the interest charged on each home loan repayment is calculated based on your remaining home loan principal, the further ahead you can get on your home loan, the less interest you may be charged on each repayment.

If, however, you need access to the funds in your redraw for say an emergency, you can redraw them out.

In addition, the interest savings you get from making additional repayments into your loan is most likely more than you’d get from a savings account.

Depending on the lender, you may have different fees and restrictions on your withdrawals. So, it’s important to talk to your broker about your goals- they can then advise you on a home loan that will work for you.

If you would like to discuss this further, please reach out.

Have a wonderful week,

The Team at Build & Protect Financial Services