What is a home loan redraw?
After taking out a home loan and starting to make repayments on your mortgage, you may find yourself thinking about ways to help save money on your payments in the long term. There are a number of different options to consider, but one of the more common ones that Australians across the country are using is known as a redraw facility.
What is a home loan redraw facility?
The basics of a redraw facility is that you're able to access any additional repayments you've made on your home loan as a line of credit, which can come in handy if there are ever any unexpected expenses you need to take care of in your life.
As you make additional repayments, the overall balance of your home loan will decrease. This, in turn, naturally reduces the amount of interest you need to pay over each period - so it's in your best interest to make as many additional repayments as possible.
Of course, the benefit of this being you're able to access these funds at anytime, which can make the decision to pay larger amounts each month more attractive - rather than making repayments and losing access to that money.
Things to be aware of
Naturally, this is quite a desirable trait for your home loan to have, which means that sometimes there are lender imposed restrictions on the facility. Things like limiting the number of times you can redraw per year through to charging per redraw. These vary between lenders, however, so it's best to speak with them about any conditions there may be on your redraw.
But having a redraw facility on your home loan can be a wonderful way to cut down on your home loan much more quickly, potentially helping you get mortgage-free faster and one step closer to owning your own home!
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