What is a redraw facility?

How redraw works in practice

Suppose your minimum monthly repayment is $2,800 but you have been paying $3,200. After 12 months, you have made $4,800 in extra repayments. With a redraw facility, you can access up to that $4,800 if you need it for an emergency, renovation, or other expense. The funds are drawn back from your loan, increasing the balance accordingly.

Most lenders offer redraw at no cost on variable rate loans. Some charge a small fee per redraw, and many have minimum redraw amounts (typically $500). Fixed rate loans may have limited or no redraw access. Lendology compares 60+ lenders and considers redraw terms as part of finding the right loan for your needs.

Redraw vs offset - which is better?

Both redraw and offset accounts reduce the interest you pay on your loan. The key difference is access and control. An offset account is a separate bank account - your money is always accessible, and no one can restrict it. Redraw accesses extra repayments, and some lenders have been known to restrict redraw access.

For most owner-occupiers with significant savings, an offset account offers more flexibility and security. For borrowers making modest extra repayments, a free redraw facility may be perfectly adequate. Lendology evaluates both options based on your savings level and how you plan to use the funds.

Frequently asked questions

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