What is a redraw facility
Making even the smallest amount of extra repayments to your home loan can save you on interest and help you pay your home loan off sooner. Sometimes though, the unexpected occurs, or the greatest holiday escape is on special. A redraw facility lets you redraw the extra repayments that you have made to your home loan. In basic terms, it’s a feature that allows you to save, whilst not locking your savings away.
The redraw facility is a common feature of many home loans. It’s not available, though, on construction loans and only some lenders allow it for fixed rate loans.
Always check with your mortgage broker if there are minimum redraw amounts, or if there are fees associated with your redraw.
You can redraw funds if, and when, they are needed, or you can keep the funds in your home loan to pay off your principal faster. The amount available for redraw is the difference between what you have paid and how much you were required to pay, less one month’s scheduled repayment.
What happens after using redraw? After you redraw money from your home loan, you must continue to make your regular repayments as per normal. Be aware though that the interest component of the repayments you make will increase because without the extra repayments in there, your principal portion of loan will have got back up.
What are the benefits of a redraw facility? Like an offset account, a redraw facility can help reduce the total interest paid on your home loan and therefore shorten the home loan.
Depending on your lender, additional payments can be made at no extra cost and redraw funds can be accessed at any time.
When comparing home loans speak with your mortgage broker before choosing the option that best suits your financial needs.
Comentários