Are you looking to fund an expensive holiday or home renovation, or need cash in an emergency? This is where the redraw facility comes to play its role. However, the question arises, what happens to redraw when the loan is paid off? Continue reading this blog to find out everything you need to know about redraw facilities and redraw balances after paying off the home loan.
What is redraw?
If you have made additional repayments on your home loan, then the redraw facility will allow you to access those additional repayments later when you need them. These additional repayments will be separately accumulated to your repayments. For instance, your monthly home loan repayment is $3,000 and in one month, your repayment was $5,000. Now, you are allowed to withdraw that extra $2,000 whenever you need. Some home owners use the redraw facility for unexpected renovation, expenses, weddings, or holidays. Redraw facility is also helpful in paying off your principal faster, and it is available for variable-rate home loans.What does happen to redraw when the loan is paid off?
You won’t be able to access the money once your home loan is paid off because, after this, the redraw facility will close. For instance, you may have $20,000 in your redraw, this amount will count toward your loan balance, so after paying off your home loan, your redraw facility will be closed as it’s paid into your home loan. Basically, the lenders contact you when they see $0 before the end of your loan term, to close your loan or eliminate some funds from the redraw facility.What happens to redraw when you refinance?
Basically, when you refinance your loan, the redraw balance will be transferred to the new lender and home loan product. It simply means you can still access additional repayments you’ve made. If you want to refinance a home loan from one variable product to another, make sure to check if the lender offers you a redraw facility for the loan product that best matches your financial circumstances. Make sure to discuss withdrawal limits and fees. Based on the lender, you might be charged a small fee when you make a withdrawal.Benefits of Redraw Facility
The following are some benefits that you can get through the redraw facility:-
Save on interest
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Extra cash on hand
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Accessibility
Redraw Facility or Offset: What to Choose When Refinancing?
Actually, there is no correct response when deciding whether to offset or redraw when trying to refinance. The advantages and disadvantages of these characteristics should be considered, especially in light of what will happen to them if you decide to refinance, whether it be with the same lender or a different one. This is especially crucial to take into account if you’re thinking about refinancing with an offset account. This is due to the possibility that opening a new offset account with new lenders is a requirement for refinancing with them. You’ll probably be able to keep your original account as a regular savings account, but for some people, refinancing means having to start from scratch. Otherwise, you must carefully consider if you want the bank to have control over this aspect of your finances or which aspect of your home loan features, such as the interest rate, monthly payments, or total debt, you want to be reduced. It all depends on what you hope to gain from your finances in the future and how much access you want to have to them.Conclusion
The blog shares information on what happens to redraw when you refinance, and the benefits of redraw. For more information on the redraw facility, you can contact Home Star Home Loan.
