What is a redraw facility?
A redraw facility is common for most home loans and allows a customer to “redraw” advanced payments. For example, if you have paid an additional $10,000 off your home loan, above the required minimum payments, generally you are eligible to withdraw this.
Some of the more traditional redraw facilities are not set up as transactional accounts, meaning you need to transfer funds from the account to a normal everyday transaction account before you can use the funds. Some of the more modern redraw accounts can do basic transactional payments but not BPAY as an example. Some lenders charge a fee for you to redraw and access the additional repayments you’ve made.
For some lenders (non-deposit taking lenders), this is all they can offer by way of a savings account or offset account.
In any case, if the redraw facility is something that you want and need for your loan, it is essential to request details about the redraw terms in case there’s something which does not meet your requirements.One great benefit of the redraw, similar to the offset account, is the more funds you contribute / save and place in the redraw, the less interest repayments you will make. This can assist with reducing your total loan term too.
It's worth noting that the redraw facility is generally going to be the home loan account, so if the limit was $250,000 and you made additional contributions to the value of $10,000, then the balance would be $240,000.