What is it?

What is a redraw facility?

So, what is a redraw on a home loan? This is a feature that allows you to make additional repayments into your home loan above the minimum monthly repayment. This can allow you to save on interest costs on your loan and pay down your outstanding balance sooner. It can also allow you to access those additional repayments when you need some additional funds, such as for that new car you’ve been looking to buy or for an unexpected emergency.

How does it work?

How does a redraw facility work? Home loan redraw pros and cons

A redraw facility only allows you to access funds that are additional to your minimum repayments. But the additional amount and how often you make these payments is up to you. And just a little bit extra today can make a big difference tomorrow.

Let’s take a look at a few different ways you can make additional repayments.

Customer Sam Lisa Ben
Minimum monthly repayment $1,500 $2,000 $3,000
How they make additional payments Paying $2,000 every month into their loan ($500 extra per month) Paying $1,200 every fortnight into their loan ($400 extra per month) Making a lump sum payment of $50,000 into their loan
Available redraw after one year $6,000 $4,800 $50,000

Remember, the money available in redraw reduces the balance owing on your home loan, meaning you will be paying less interest on your home loan and could pay down your home loan sooner.

Accessing your money: how does a redraw account work?

Wondering what happens if you access those funds available in redraw? The easiest way to explain is to put some numbers to it.

Suppose you have $50,000 available in redraw and you wish to access $5,000 to pay for that well-earned vacation. The balance owing on your home loan will increase by $5,000 and you will now have $45,000 available in redraw. Your interest payments will also increase accordingly.

A minimum amount you can redraw ($100) also applies.

Loans with redraw

What types of loans is redraw available on?

Not every home loan has a redraw facility, meaning you need to choose a mortgage with redraw features.

At Virgin Money, you can make unlimited repayments into variable rate loans and redraw additional repayments whenever you like.

For fixed rate loans, you can make $10,000 in additional repayments during each year of the fixed rate term. However, you can only redraw additional repayments once the loan reverts to a variable rate loan.

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