What is a redraw facility? 🐾
When you’re looking at home loan options, you’ll often see the term “redraw facility” pop up. It’s a handy feature on many variable-rate loans, but it’s also one that plenty of Aussies aren’t 100% clear on. So let’s break it down in plain English.
What is a redraw facility?
A redraw facility lets you take back any extra repayments you’ve made on your home loan above your minimum repayment.
So if you pay more into your loan than required, that extra money reduces your loan balance — and your interest — but you can still access it later if you need to.
It’s your money, just working a bit harder behind the scenes.
How does redraw help you?
A redraw facility can:
Reduce your interest by lowering your loan balance, even temporarily
Create a financial buffer for emergencies or planned expenses
Give you flexibility without locking your money away
Help shorten your loan term if you consistently make extra repayments
For many people, it’s a simple way to stay ahead on their mortgage without reducing access to their cash completely.
How is redraw different from an offset account?
This is where people often get mixed up. Both features reduce interest, but they work differently:
Redraw facility
Extra payments go into your loan
You can withdraw them later (subject to lender rules)
May have limits, delays, or minimum redraw amounts
Can have Tax implications for investment loans
Usually no additional charge to have access to redraw
Offset account
Acts like a normal bank account sitting next to your home loan
Every dollar in the offset reduces your loan interest
Usually more flexible and immediate access to your funds
Often comes with additional package fees or different loan types
Redraw is great if you want to quietly chip away at your loan. Offset is better if you need day-to-day access to your cash.
When might redraw be a good option?
A redraw facility can be most useful if you:
It can kind of act like a sudo ‘savings account’ if you’re more comfortable with that style of banking
Regularly make extra repayments
Want to reduce interest without paying for an offset
Don’t need instant access to your extra funds
Prefer a simple, low-maintenance way to get ahead on your mortgage
Things to watch out for
Not all redraw facilities are the same. Depending on the lender, you might see:
Minimum redraw amounts
Redraw fees
Delayed processing times
Online or in-branch restrictions
Limits on access for fixed-rate loans
It’s always worth checking how your specific lender handles redraw (or ask me), so you’re not caught off guard when you need the funds.
Need help deciding between redraw, offset, or both?
If you’re not sure what’s right for your situation, I’m always happy to walk you through it!
Talk soon - Iain (& Dave)