What is redraw?
Let’s say you’ve made a habit of paying more than your minimum scheduled home loan repayments. This means you’ll have money available to take back out – if you want to.
This process is known as redraw. You can use this money to pay for sudden expenses, or planned things such as:
a new car.
Keep in mind there are times when redraw might not be available. For example:
if you have a fixed rate loan, redraw is only available at the end of the fixed rate period (i.e. when the rate becomes variable)
you can’t access redraw for construction loans.
Features of redraw
You can generally access all the funds you’re ahead by, minus one month’s scheduled repayment.
After you redraw money from your home loan, you must continue to make your regular repayments.
It’s important to remember that the interest part of your repayments will increase because you’re now paying interest on a higher loan amount.
What are the benefits of redraw?
Knowing you have a source of finance just sitting there, in case you need it, can give you simple peace of mind. Plus, this money accumulates over time and is easy to access.
Using your redraw facility can also be cheaper than using a credit card or personal loan. This is because the interest charged on your home loan is usually lower than with other types of credit.
How do I use a redraw facility?
You can use internet banking or contact your lender to see if redraw is available with your loan and how much you have available to use. If you’re all good to go, you can redraw straight away.
Speak to us or your lender to find out more.
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/manage-debt/use-loan-redraw
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