Mortgage Redraw Explained: How a Redraw Facility Works on Your Home Loan

If you’ve got a home loan, you’ve probably heard terms like mortgage redraw or redraw facility thrown around by lenders. This may sound technical, but the concept is simple: redraw gives you flexible access to any additional repayments you’ve made into your home loan.

Used well, redraw can help you pay less interest, pay off your loan sooner, and still give you a safety buffer for emergencies.

In this guide, we’ll unpack exactly what redraw is, how it works, the pros and cons, and how it compares to an offset account.

Redraw Meaning: What Is a Mortgage Redraw Facility?

A mortgage redraw facility is a feature on many home loans that allows you to take back (redraw) the extra repayments you’ve made on top of your minimum required repayments.

Put simply:

• You pay more than the minimum into your home loan.

• Those extra repayments reduce your loan balance and interest payable.

• A redraw facility lets you withdraw some or all of those extra funds later if you need them.

So the redraw meaning is just this:

Redraw is the pool of extra money you’ve paid into your mortgage that you’re able to access again.

It’s not a separate bank account. It’s part of your home loan itself, which is why lenders emphasise that redraw is a loan feature, not a standalone savings account.

How Does a Redraw Facility Work on a Home Loan?

Here’s how a typical redraw facility works in practice.

1. You make extra repayments

   • Your required repayment might be $2,500 per month.

   • You decide to pay $3,000 instead.

   • That extra $500 each month goes towards reducing your loan principal faster.

2. Your interest is calculated on the reduced balance
   Because you’ve lowered your principal, your interest is calculated on a smaller amount, so you pay less interest over time.

3. Your extra repayments become available redraw
   Over time, those extra payments accumulate as an available redraw balance. Your lender may show:

   • Loan balance (what you owe), and

   • Available redraw (extra funds you can access).

4. You withdraw (redraw) when needed
   If you need money for things like renovations, a car, or an unexpected expense, you can redraw from that available balance rather than applying for a new personal loan or credit card.

5. Your loan balance increases again
   When you use your redraw:

   • Your loan balance goes back up, and

   • The interest you pay also increases again, because you’re now borrowing more.

Many lenders have some rules around their redraw facility, such as:

• Minimum redraw amounts (e.g. $500 or $1,000).

• Fees per redraw (especially on older loans).

• Cut-off times for same-day processing.

• Online, app or branch-only access.

• Requirements to be at least one repayment ahead before you can redraw.

If you'd like to calculate how much extra repayments can save on your home loan, use our Repayments Calculator under the extra repayments section, to determine how much time you can save on your home loan.

Benefits of Using Mortgage Redraw

A well-designed mortgage redraw facility can be a powerful tool for managing your home loan.

1. Interest savings and faster payoff

Every dollar you pay above your minimum repayment reduces your home loan principal and therefore the interest charged. Over many years, this can shave thousands of dollars off your total interest bill and help you pay off the loan sooner.

2. Flexibility and access to your own money

Redraw gives you a way to access your extra repayments if you really need them, which can be more flexible than making permanent lump sum reductions with no way back.

Instead of:

• Taking out a high-interest personal loan, or

• Running up credit card debt,

you can tap into your own money that’s already working to reduce your mortgage.

3. Can help with budgeting discipline

Because redraw is part of your home loan, it’s generally less tempting to dip into than money sitting in an everyday savings account. This can be useful if you struggle with the temptation to spend.

Risks and Limitations of a Redraw Facility

A redraw facility is not completely free of strings. Top-ranking lender and broker pages all highlight some key watch-outs.

1. Access conditions and fees

Depending on your lender and specific loan:

• There might be minimum redraw amounts.

• Some older or “basic” home loans may charge redraw fees.

• Certain redraws may require banker assistance (for example, if the borrower is a company or trust).

These conditions can make redraw less convenient than simply spending from a transaction account.

2. Not always available on all loan types

Many variable rate loans include a redraw facility, but fixed rate loans and some low-cost basic loans may not allow redraw or may have stricter limits.

Before you rely on redraw, check:

• Is redraw available on your specific product?

• Are there restrictions during fixed-rate periods?

3. Lender control and policy changes

Because redraw sits within your home loan:

• The lender can change policy settings, access methods, or conditions over time.

• If you refinance or switch lenders, the way your redraw is treated can change. In some cases, you may lose access if it’s not handled correctly.

4. Slowing down your debt-free goal

Every time you use redraw, you’re effectively increasing your debt again. While that’s the point of the feature, consistently dipping into redraw can keep you in debt longer and increase total interest costs.

Redraw vs Offset: What’s the Difference?

Top articles on mortgage redraw almost always compare redraw with an offset account, because many borrowers are deciding between the two.

Here’s a simple breakdown:

Redraw Facility

• What it is: A feature of your home loan that lets you access extra repayments you’ve made.

• How it saves interest: Extra repayments reduce your loan principal, so interest is calculated on a lower balance.

• Access to money: Usually accessed via your lender’s app or online banking. May have minimum amounts, delays or fees.

• Discipline: Harder to spend on impulse, which some people like.

Offset Account

• What it is: A separate transaction account linked to your home loan.

• How it saves interest: The balance in the offset account is offset against your loan balance, and you only pay interest on the difference.

• Access to money: Works like a normal bank account – cards, transfers, direct debits, etc.

• Fees: Some loans with offset accounts come with higher interest rates or package/annual fees.

Which is better?
It depends on:

• How often you want quick, everyday access to your money.

• Whether you prefer a disciplined, “out of sight, out of mind” approach (often better suited to redraw).

• Any fees or interest rate differences between the two options on your chosen loan.

Some borrowers even use both: an offset account for short-term cash flow and a redraw facility for extra, less frequently accessed repayments.

When Using Redraw Might Be a Good Idea (and When to Avoid It)

Situations where redraw can work well

A redraw facility can be useful when:

• You want to pay your mortgage off faster, but still keep a safety buffer.

• You’re planning for renovations and want to save into redraw rather than a separate loan.

• You like the idea of reducing interest first, and only dipping into funds if genuinely needed.

• You’re comfortable that access might not be as instant as a normal bank account.

Times to be cautious about using redraw

You may want to limit how often you use redraw if:

• You’re trying to get debt-free by a certain date – frequent redraws will push that date out.

• There are fees or minimum redraw amounts that make it costly for small withdrawals.

• You’re relying heavily on redraw for regular spending, which can signal a deeper cash-flow issue.

• You’re planning to refinance or restructure your loan – you’ll want to understand what happens to your redraw balance in that process.

Key Questions to Ask About Your Mortgage Redraw Facility

Before you rely on redraw as part of your strategy, ask your lender or broker questions like:

1. Is a redraw facility available on my specific home loan?

2. Is it available on both variable and fixed portions, or just variable?

3. Do you charge fees for using redraw, and is there a minimum redraw amount?

4. How quickly can I access my redraw – instantly via app, or does it take a day or two?

5. Are there any limits on how often I can redraw?

6. What happens to my redraw balance if I refinance, switch lenders, or change my loan structure?

7. How does this redraw facility compare with an offset account on the same loan?

Getting clear answers helps you use mortgage redraw as a deliberate tool, not just a convenient tap for extra cash.