Yellow Brick Road: Home
YBR

How Redraw Can Surprise You with Its Savings

In this article:

While interest rates remain low, find out how to pay off your home loan faster using a redraw facility.

You get the best of both worlds with a home loan redraw. This handy loan feature enables you to make extra repayments to your principal and save on interest. At the same time, you have the peace of mind that you can access these extra repayments should you be faced with an unexpected or emergency expense.

Staying ahead of your minimum monthly repayments by making regular overpayments is a smart way to pay off your home loan. Driving the principal down faster will reduce the interest you’re charged each month and help you pay off your mortgage quicker

Redraw is a home loan feature well suited to owner-occupiers who are intent on paying down home loan debt quickly.

Redraw offers tax advantages over storing funds in a savings account. Any interest you save on your home loan is not subject to tax, whereas any interest earned on funds stored in savings accounts is usually taxable. (Please note that any money you redraw back from your loan is not tax deductible).

For as long as you have extra funds in your mortgage you have the security of knowing you have a buffer to cope with hard times as well as the financial stability to weather any future interest rate rises.

Redraw is a home loan feature well suited to owner-occupiers who are intent on paying down home loan debt quickly, without needing frequent access to spare funds.

Take the first step

Plug your loan details into Yellow Brick Road’s extra repayments calculator to find out what savings you can make with regular overpayments.

 

What to know about redraw

  • It is a feature of most variable rate loans, but not usually available for fixed-rate or construction mortgages
  • The fees and conditions of redraw facilities often vary from one lender to the next
  • It allows you the choice to make extra deposits either by increasing your regular payment amount or by paying in lump sums
  • There may be a limit to the number or frequency of redraws allowed
  • You might incur fees for each withdrawal
  • There is usually a minimum amount (e.g., $500) you’re permitted to redraw
  • Depending on the lender, it may take time to access funds from your redraw, or you may be able to access them instantly.

How is redraw different to offset?

An offset is a savings or transaction account connected to your home loan, where you deposit funds and use it to pay off your bills and daily expenses. You don’t earn interest on the money sitting in your offset account; instead, the balance is offset against your mortgage amount.

Like redraw facilities, offset accounts differ in their fees, terms and conditions. Some are fully offset (100%) while others are only partially offset and may be conditional on a minimum account balance or withdrawal amount.

Your Yellow Brick Road mortgage broker can tell you more about the pros and cons of redraw and offset. We’ll explain the subtleties of these features and whether they will work in your situation to help pay off your loan faster.

**The information on this article contains general information and does not take into account your personal objectives, financial situation or needs. If you require further information don’t hesitate to contact the branch directly. 

Feature articles

Why & How to Manage your Mortgage after Settlement Monitoring your home loan after settlement is essential to capitalise on saving and quicker homeownership opportunities. Here's a quick guide on things you need to keep in mind.

A Guide to Mortgage Pre-approval In addition to providing a clear idea of your borrowing capacity, a mortgage pre-approval can also expedite property purchase. Here a few things you need to consider before applying for one.

What to consider while switching to a lower fixed rate If you're considering switching from a variable rate to a fixed rate loan in the wake of the recently announced RBA rate cut, be sure to weigh the saving benefits against possible trade-offs like no offset account and redraw facility.

What the November RBA rate cut means for borrowers Here's a quick guide on how to benefit from the recent RBA rate cut on 3rd Nov 2020

Decoding property price rise & the latest RBA rate cut Here's why gradually rising property prices and all time low interest rates make it perfect time to hop on to the property ladder.

View all articles



Enquire now