Redraw

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A redraw facility will allow for the withdrawal of any extra money paid into the loan account, which was in excess of the normal monthly payments.  In other words, extra loan repayments can be made when the borrower can afford them, and any extra money paid into the loan account can be withdrawn at any time, if needed. The money redrawn (or drawn out) can be used for just about anything , such as a renovation, to buy a car, a holiday, children’s education, etc.

There can be restrictions imposed by some lenders, such as a minimum redraw amount or a restriction on the number of redraws. There may also be a set minimum and maximum redraw amount.

A redraw facility may be an efficient way of saving up for something, because the money being saved is being used to effectively reduce the interest payable on the home loan. However, one has to consider the cost of having the redraw facility when compared to the savings made.



Some Pros
-Redraw provides easy access to funds
-Potential tax savings
-May be more cost effective than a savings account


Some Cons
-Costs associated with setting up and running a redraw facility
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