You’ve probably heard the term redraw facility if you’ve been exploring home loan options, but what does it actually mean?
Don’t worry, we’re here to break down the bank jargon to help you make the right decision for you.
What is a redraw facility?
Some people try to pay their home loans off sooner and make extra repayments when they can. Life can be unpredictable and sometimes you might need to access that money for emergencies or simply a holiday.
A redraw facility allows you to make those extra repayments and access that money if you need it in future. You can also sometimes use redraw facilities as a way to take a break from your required payments (so long as you’ve made enough extra payments to cover these).
When you keep your offset account for a long time, with a high balance, you might just be able to pay off your home loan sooner by paying less interest.
What’s the difference between a redraw facility and an offset account?
A redraw allows you to withdraw the additional payments you’ve made towards your home loan that is on top of your required minimum payments.
On the other hand, an offset account is a separate account that is linked to eligible home loans, where you can store savings to help reduce your repayments and pay off your loan sooner. An offset might be a better idea if you plan on using the money you have saved regularly.
Otherwise, if you’re not expecting any costs coming up that would require you to use extra funds, it may be worth choosing a redraw facility instead.
Buying a property is a journey. Whether it's your first purchase, a life-changing move or a long-term investment, the journey is never the same. We understand each buyer is different and so is each home. That's why we have a range of home loans to suit your needs.
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Things to consider
If you’re thinking about having a redraw facility attached to your home loan, it’s worth considering the below.
• Withdrawing the funds will mean it will take you longer to pay off your loan.
• Withdrawing your funds may cause your repayment amount to increase.
• Some loans don’t have redraw options. Consider this if switching home loans.
What's an offset account?
Find out what an offset account is, how it works, and how it can help you to own your home sooner.
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Understand the differences between fixed and variable rate home loans.
What’s a split home loan?
Splitting your home loan gives you greater flexibility. Learn how it works, and how it could help you in the long run.
Home Loan Interest Rates effective 11 May 2022.
1. Comparison rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different comparison rate. Fees and charges apply. Terms and conditions available upon request.
2. New apps received 30 Jun 2022, funded by 30 Sep 2022. Not available to existing Bank First owner occupied or investment home loan customers. Min loan $200k, max loan $2m, interest only not available. Premier Package annual fee of $390 will be waived for the first year and charged annually thereafter. Rate includes a 0.33% p.a. discount off the standard Premier Package variable rate for three years after which it will revert to the standard Premier Package variable rate. Not available in conjunction with any other offer. Bank First reserves the right to amend or withdraw this offer at any time.