Mortgage redraw is very useful when you need to pull out some of your extra home loan repayments to cover emergencies or expenses.
Many loans have a minimum redraw of $500 or more, which limits the flexibility of this feature. But loans with no minimum redraw let you take out even small amounts of money. This gives you more control over your mortgage.
Get a home loan with free redraw
The loans in the table below all offer redraw without a fee, but some may specifiy a minimum redraw amount.
Rates last updated July 24th, 2019
How does a home loan with a redraw facility work?
A mortgage with a redraw facility lets you make extra repayments on top of your minimum monthly repayments. This helps you pay off your loan faster. A redraw facility lets you withdraw those extra repayments if you need them. This is very helpful when you need some extra cash in emergencies or unforeseen circumstances.
Most redraw facilities have a limit on the minimum withdrawal amount, with most encouraging larger withdrawals.
Redraw facility: example scenario
The amount of money you redraw from a mortgage can change your debt significantly.
If your home loan requires you to make repayments of $800 every month but you make $900 repayments, you will have made extra repayments of $1,200 in a year. Because there is no minimum redraw amount, you can withdraw as little as $200. This amount will not have a significant impact on your loan because your debt is still reduced by an extra $1,000.
However, if the home loan had a minimum redraw amount of $1,000, you would be forced to withdraw that much leaving you with an extra repayment of only $200. Not having a minimum amount allows you to make your extra repayments count.
Learn more about redraw and how it differs from an offset account
How do I compare a mortgage that has no minimum redraw amount?
- Redraw terms and conditions. Lenders all have different terms and conditions. These range from limits on the number of redraws you can make per year or a specified term to free redraws. Be sure to check the fine print before choosing a loan.
- Fees. Fees are an important consideration when comparing loans. Some lenders could charge you for using your redraw facility.
- Access. Compare the ways your the mortgage lets you access extra repayments. Some banks allow you to access your redraw facility through online banking, mobile apps and phone banking or even via a credit card.
- Interest rates. Compare the different interest rates offered by the lender. Whether you go for a fixed, variable or a split rate, you need to ensure that you are getting competitive interest rates.
The pros and cons of mortgages with no minimum redraw
Pros
- No minimum limit. Most home loans with redraw facilities have limits on the minimum amount of additional repayments you can withdraw. Some of these limits are as high as $1,000. Loans with no redraw minimum let you withdraw small funds without being pressured to take out more than you need.
- Access your funds when you need them. If you make additional repayments you don’t have to worry about getting an extra loan to cover emergencies. You have access to funds when you need them and this could be useful for unforeseen financial emergencies.
- Redraw doesn’t affect your scheduled repayments. The withdrawals you make do not affect your loan amount since you can only withdraw extra repayments.
Cons
- Frequency limits. While there is no minimum redraw amount, there might be limits on the number of times you can access this facility. You might not be able to redraw funds on a regular basis because of these limits.
- Extra fees. There may be extra fees that apply when you use the redraw facility.
- Typically not available with fixed rate home loans. There may be extra fees that apply when you use the redraw facility with a fixed rate home loan.
Compare more mortgages from across the market
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Richard Whitten is Finder's home loans writer. He helps Australians understand the ins and outs of mortgages so they can find lower rates and make smarter property decisions. Richard trained as a high school English teacher at the University of Sydney, but found that mortgage management was more rewarding than classroom management. Before working at Finder he lived in Seoul, where he edited textbooks and ran communication courses for Korean corporations.
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