Home Loan Redraw Facilities

What redraw facilities offer

A redraw facility allows you to access extra payments you've made above your required loan repayments. This feature provides flexibility to reduce interest costs through additional payments while maintaining access to those funds for future needs.

How redraw facilities work

When you make payments above your minimum required amount, these surplus funds reduce your loan balance and the interest you pay. The redraw facility allows you to withdraw these extra payments if needed, though the funds return to your loan balance when accessed.

• Extra payments reduce loan principal and interest charges immediately
• Surplus payments become available for redraw (subject to terms)
• Minimum redraw amounts typically apply ($500-$1,000)
• Processing times vary from immediate to several business days
• Interest starts accruing again on redrawn amounts

Benefits for borrowers

Redraw facilities provide an effective way to reduce loan interest while maintaining financial flexibility, making them particularly valuable for borrowers with irregular income or occasional large expenses.

• Significant interest savings from reduced loan balance
• Emergency fund access without separate savings account
• Maintains loan structure for tax deduction purposes (investments)
• No ongoing fees unlike offset accounts
• Encourages extra payments knowing funds remain accessible

Redraw vs offset account comparison

Both redraw and offset accounts reduce interest charges, but they work differently and suit different borrower needs and preferences.

Redraw facilities: Redraw facilities form part of your loan account, with extra payments directly reducing the principal balance. Access to funds may have restrictions and processing delays.

Offset accounts: Offset accounts are separate savings accounts where balances reduce interest without affecting loan principal. They offer immediate access but often have ongoing monthly fees.

Restrictions and considerations

Redraw facilities come with various restrictions that borrowers should understand before relying on them for financial flexibility.

• Minimum redraw amounts and potential processing delays
• Lenders can suspend or remove redraw facilities
• May have annual limits on redraw amounts
• Processing fees may apply for frequent redraw requests
• Funds may not be immediately available in emergencies

Tax implications for investors

Investment property owners need to carefully consider how redraw affects tax deductions, as redrawn funds used for non-investment purposes can impact deductibility.

For investment properties, redrawing funds for personal use may affect the tax deductibility of interest payments. Maintain detailed records of the purpose of redrawn funds to preserve appropriate tax benefits.

Strategic redraw usage

Effective use of redraw facilities requires discipline and planning to maximize benefits while maintaining appropriate financial reserves for unexpected expenses.

• Build substantial buffer before considering redraw access
• Use primarily for property improvements or investment purposes
• Avoid redraw for consumer purchases or lifestyle expenses
• Monitor lender terms for any changes to redraw conditions
• Consider redraw as part of broader debt reduction strategy