How to Use a Redraw Facility on Your Home Loan

A redraw facility lets you take back extra repayments you've made on your home loan without refinancing or setting up a separate account.

If you're buying in Mentone or already own here, a redraw facility can give you breathing room when something unexpected comes up or when you want to fund a renovation without tapping into a credit card. It works by allowing you to withdraw any amount you've paid above your minimum required repayments. Most variable rate loans include a redraw facility at no extra cost, though some lenders charge a small fee each time you withdraw.

How a Redraw Facility Actually Works

You make extra repayments beyond your scheduled minimum, and those additional funds sit in your loan account reducing the interest you're charged. When you need cash, you request a withdrawal through your lender's app, internet banking, or by calling them directly. The funds are usually available within one to three business days, depending on the lender.

Consider someone who bought a townhouse near Mentone Station with a $600,000 loan. They've been paying an extra $500 each month for two years, building up $12,000 in available redraw. When their car breaks down and needs $4,000 in repairs, they redraw that amount from the loan. The loan balance increases by $4,000, but they avoid using a credit card or personal loan with a much higher interest rate. They continue making their regular repayments plus the extra $500, gradually rebuilding their redraw balance.

Redraw Facility vs Offset Account

A redraw facility reduces your loan balance directly, while an offset account sits separately and reduces the interest charged on your loan without changing the balance itself. With a redraw, you're pulling money out of the loan. With an offset, you're keeping money in a linked transaction account that offsets the interest calculation.

Redraw facilities typically come with no ongoing fees on variable rate loans, though withdrawal fees of $10 to $50 can apply depending on the lender. Offset accounts often have an annual package fee ranging from $200 to $400, but they give you instant access to your funds and don't require a formal withdrawal process. For Mentone buyers who keep a healthy buffer in their everyday accounts, an offset can make more sense. For those who prefer to put everything directly into the loan and only need occasional access, redraw works well.

When Redraw Makes Sense for Mentone Homeowners

Mentone's proximity to the beach and the Parkdale shops means many properties here are older character homes that need regular upkeep. A redraw facility gives you the option to fund those renovations or repairs without applying for a separate loan or using high-interest credit.

If you're planning to keep your loan for several years and you're disciplined about making extra repayments, redraw can save you thousands in interest while still giving you access when needed. It's also useful if your income is variable. Tradies, small business owners, and people who work on commission can put extra cash into the loan during strong months and redraw during quieter periods.

What to Watch Out For

Some lenders limit how often you can redraw or set minimum withdrawal amounts, often around $500 or $1,000. Others reserve the right to reduce or suspend redraw access if your financial situation changes or if you're behind on repayments. Fixed rate loans rarely include redraw, and when they do, restrictions are usually tighter.

If you're considering a split loan with part fixed and part variable, the redraw facility will only apply to the variable portion. That's something to factor in if you want flexibility but also like the certainty of locking in part of your rate.

Tax is another consideration for investors. Extra repayments made on an investment loan reduce the deductible interest, and if you later redraw for personal use, the ATO won't let you claim that portion as a deduction anymore. If you're holding an investment property near Mentone's coastal strip or around Como Parade, keep your personal and investment redraw separate or use an offset instead.

Setting Up Redraw Through a Broker

Most lenders offer redraw automatically on their variable rate products, but the terms vary. Some allow unlimited redraws with no fees. Others charge per transaction or cap the number of free withdrawals each year. A mortgage broker in Mentone can compare lenders based on redraw terms, not just interest rates, so you're not stuck with a loan that looks good on paper but restricts access when you actually need it.

When you're applying for a loan or looking at refinancing, ask specifically about redraw fees, processing times, minimum withdrawal amounts, and whether the lender has ever suspended redraw access for existing customers. Those details don't always appear in the standard product disclosure, but they matter when you're relying on that cash in an emergency.

If you're weighing up whether a redraw facility or an offset account suits your situation, or if you want to check what's available on your current loan, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions