Redraw Explained: Access Extra Payments on Your Home Loan.
A redraw facility is a feature offered by many home loan lenders that allows borrowers to access additional payments they've made on their mortgage.
This feature can be beneficial for homeowners as it provides flexibility and access to funds in case of emergencies or unexpected expenses.
However, it's essential to understand how redraw facilities work and their implications before deciding if they're right for you.
A redraw facility essentially allows borrowers to access any extra payments they've made on their home loan. Let's break down how this works and what you need to know about this feature.
How Does a Redraw Facility Work?
When you make extra repayments on your home loan, whether it's a lump sum payment or additional regular payments, the amount above your required repayment goes into your redraw facility. This money is still technically part of your loan but is separate from your regular loan balance.
If you ever need access to these extra funds, you can request a redraw from your lender. This can be useful for various purposes, such as home renovations, unexpected medical expenses, or even funding a holiday.
Benefits of a Redraw Facility
Flexibility: It provides flexibility by allowing you to access extra funds when needed without having to apply for a separate loan.
Potential Interest Savings: Making extra repayments can help reduce the interest you pay over the life of the loan.
Emergency Fund: Acts as a kind of emergency fund within your home loan, providing peace of mind.
Considerations Before Using a Redraw Facility
Fees: Some lenders may charge fees for redrawing funds, so it's crucial to be aware of any associated costs.
Impact on Loan Term: Redrawing funds can extend your loan term if not managed carefully, potentially increasing the total interest paid.
Loan Conditions: Check your loan agreement for any specific conditions or restrictions related to redraw facilities.
Conclusion:
A redraw facility can be a valuable feature for homeowners, offering flexibility and access to extra funds when needed. However, it's essential to weigh the benefits against any potential costs or impacts on your loan term before deciding to use this feature.
For more information or assistance with your home loan options, feel free to reach out to Proactive Lending Solutions and consult with our expert consultant,
Shaun, at 0424 513 740 or via email at info@proactivelending.com.au.
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