Get access to the extra money you’ve put on your home loan and pay nothing to do it
One of the secrets to paying off a home loan or any kind of credit early is in paying more than the minimum payments. This ensures that you pay off your loan early and as a result save in interest, because your loan amount gets smaller faster. A useful feature which makes it easier to make extra repayments is a redraw facility, which enables you to withdraw funds when you need them.
Compare home loans with free redraw facilities
How does a home loan with free redraw work?
As mentioned, a redraw facility allows you to withdraw any extra repayments you’ve put towards your loan. This enables you to make additional repayments towards your loan and not worry about whether you can access these same funds in the event of an emergency, a sudden expense or an unexpected bill.
Unfortunately, some loans will offer a redraw facility but charge a fee. In some cases, this fee might be waived if your redraw is over a certain amount, or if you redraw using online methods as opposed to phone or branch banking. Other loans will simply offer a free redraw facility.
Redraw fees usually range around the $50 mark, so being able to avoid these, especially if you plan to make extra repayments and redraw often, can save you hundreds and even thousands over the course of your loan.
What types of home loans offer free redraw?
A redraw is a common facility offered on a range of home loans, from the most basic to the most feature-packed. In general, you should be able to find a free redraw facility on the loan types below. These loans can have fixed, variable or split interest rates, although keep in mind that fixed rate home loans are less likely to offer redraw as many will not allow borrowers to make extra repayments in the first place:
- Basic home loans - These loans are offered with minimal features, fees and interest rates. Redraw is often still offered on these, and with some low cost basic loans it will be free.
- Package home loans - A package home loan often bundles credit cards, savings accounts and other products together with your home loan and offers fee waivers and improved rates on your savings accounts and home loan. In return for this you usually have to pay an annual fee. These loans often come with redraw facilities, and some of these will be free.
- Bad credit home loans - Bad credit borrowers can still access a range of home loans, many of which will come with free redraw facilities.
- Low doc home loans - If you’re self employed and can’t supply the full range of income evidence required in a regular home loan, a low doc loan can help you buy a home or refinance. These loans are also available with free redraw facilities in some cases.
How to compare home loans with free redraw facilities
Comparing a home loan with a free redraw facility is in many ways similar to comparing regular home loans. This means you should first compare:
- Rates. First decide whether a variable, fixed or split rate will suit you more, and then compare the interest rate you’ll receive. Your rate, along with the fees you pay, are a good indication of how much your loan will pay. To make a comparison easier, you can also use the comparison rate, which is a combination of the interest rate you’ll pay and any fees which are payable.
- Fees. The major fees to be aware of when comparing home loans are the application fees, settlement fees, valuation fees and legal fees. Together these can cost thousands. Some loans will waive many of these fees, especially if they’re basic or no frills loans. In some cases, loans will charge monthly service fees, and most package home loans will charge an annual fee. This isn’t always a bad thing, but ask yourself if the fee is worth the rate and features you’re receiving.
- Other features. Depending on how you’ll use your loan, other features might be useful to you. These include features such as a 100% offset account, which allows you to deposit funds and your salary into it to offset some of the interest you’ll be charged, and also loan portability, which allows you to take your loan with your if you sell your property.
Things to consider about home loans with free redraws
If you’re looking for a loan with free redraw, there are some additional factors you should be weary of. First off, ensure that if there’s a minimum redraw amount on a home loan, it will suit you. Redraw minimums can range from $500 to $1000, so if you plan to only make large redraws to coincide with larger purchases, this might not matter. As mentioned, not every loan will have a minimum redraw amount.
Also keep in mind that some redraw facilities will only waive fees if you redraw online or over the phone. If you redraw at a branch you still may be charged fees depending on the loan. Ensure that the redraw method will be easy for you and will suit your lifestyle.
Some home loans will offer a debit card to give you access to your redraw. It’s always a wise idea to find out which ATMs will allow you to withdraw funds from without incurring ATM fees, as these can add up.
Frequently asked questions about home loans with free redraws
Can I access my redraw through a debit card?
Many home loans will offer a debit card which you can use to access your extra funds. Often times this will be free, but as always check the terms and conditions to ensure there are no extra service fees for this.
What can I use my redraw funds for?
You can redraw funds for whatever reason you may have, including bills, to pay for other investments, holidays, cars and more.
How often can I redraw?
This will depend on your home loan, but many loans today will offer unlimited redraws.