When managing your mortgage, making extra repayments can significantly reduce the total interest you pay and help you pay off the loan faster. But what if you need to access those extra funds later? That’s where a Redraw Facility becomes useful.
What is a Redraw Facility?
A redraw facility allows you to withdraw the additional repayments you’ve made on your home loan, beyond the minimum required. This feature offers flexibility for borrowers who want to reduce their loan interest but still retain access to their money when needed.
For example, if your monthly repayment is $2,000 and you consistently pay $2,500, the extra $500 per month accumulates in your loan account. A redraw facility gives you access to those additional payments.
When is a Redraw Facility Useful?
Accessing your extra repayments through a redraw facility can be helpful in many real-life situations, such as:
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Covering renovation or repair costs
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Funding a child’s education
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Investing in other opportunities
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Managing unexpected expenses or emergencies
This flexibility means your money isn’t locked away permanently, and it can be used strategically when needed.
Key Considerations and Limitations
While redraw facilities offer many benefits, it’s important to understand their limitations:
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Transaction restrictions: Some lenders place limits on how much and how often you can redraw.
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Access delays: Unlike offset accounts, redraw funds may not be instantly accessible.
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Fees: Certain loan products charge fees for using the redraw facility.
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Loan structure matters: Not all loans come with redraw. Fixed rate loans, in particular, may have restrictions.
Redraw vs Offset Account
These two features are often confused, but they work differently.
| Feature | Redraw Facility | Offset Account |
|---|---|---|
| Purpose | Access extra repayments | Link your savings to reduce interest |
| Flexibility | Less flexible (limits may apply) | Highly flexible (acts like a transaction account) |
| Interest Impact | Reduces loan principal over time | Reduces interest daily |
| Instant Access | Sometimes delayed | Usually instant |
In short, a redraw facility is better suited for long-term savings that you may need in the future, while an offset account is ideal for daily cash flow management.
Is a Redraw Facility Right for You?
If you’re disciplined with repayments and want to reduce your mortgage faster — but still want access to your funds later — a redraw facility can be a smart addition to your loan.
However, it should be part of a broader loan strategy that aligns with your lifestyle and long-term financial goals.
Need Help Reviewing Your Loan?
At SW Global Finance, we help borrowers structure their loans with the right mix of flexibility and savings.
Contact us for a free loan review or consultation:
Call/WhatsApp: +84 96 275 92 07
Email: support@sw-globalfinance.com.au