A home loan redraw facility lets you access extra repayments you have made above your required repayments, subject to your lender's rules. Those repayments reduce your loan balance until you redraw them. Your available amount can change, and using redraw for a different purpose can change the tax treatment of interest.
How a Redraw Facility Works
Redraw gives you access to repayments made ahead of your loan's minimum schedule. In a hypothetical example, your required monthly repayment is $2,500 and you pay $3,000. The extra $500 puts you ahead and contributes to redraw, although the amount you can withdraw depends on the lender's rules.
The extra money has repaid part of your debt. Redraw is not a separate savings account holding that money. Withdrawing through redraw increases the debt again, so interest is then charged on a higher balance.
Redraw is available on eligible variable rate loans. Fixed rate products often restrict access, even when they allow some extra repayments. With a split home loan, treat the variable and fixed portions separately when working out what you can access.
Why Clients Value It
Extra repayments reduce the balance on which the lender calculates interest. An extra $10,000 left in your loan means interest is calculated on $10,000 less debt for as long as that reduction remains. The saving depends on your interest rate and how long the money stays in the loan.
You receive a lower interest cost, with no savings interest income to declare. For an investment loan, paying less interest also means there is less interest expense to claim.
Access to redraw can make regular extra repayments easier to commit to because you retain a way to fund unexpected expenses. The trade-off is that access depends on the loan conditions. Keep money needed for immediate bills somewhere you can access within the required time.
Conditions Worth Checking
Before relying on redraw, check the withdrawal rules for your loan and the available amount shown in your lender's app or internet banking. Use this checklist when comparing products or reviewing an existing loan.
- Check the minimum withdrawal and any transaction or daily maximum. NAB's redraw guide specifies a $500 minimum and a $150,000 maximum per transaction for eligible redraws. NAB also keeps one scheduled repayment ahead when calculating availability.
- Check fees for each access method. CommBank's access guide lists no fee or minimum for eligible online redraws, with a $1,000 branch minimum. Do not assume another loan has the same terms.
- Allow for processing time. ANZ's redraw guide says approved online business-day requests generally arrive the same day, while phone requests can take up to two business days. ANZ lists no minimum redraw for eligible home loans.
- Ask how a withdrawal changes required repayments. A higher balance can trigger a repayment increase so the loan remains repayable within its agreed term.
- Check restrictions while a fixed portion remains. ANZ excludes redraw during the fixed rate period. Available redraw on a separate variable portion does not give access to repayments on the fixed portion.
- Check suspension rules during default or a hardship arrangement. NAB can suspend redraw when a borrower's account is overdue or further borrowing threatens repayment capacity. CommBank suspends redraw during its repayment holiday, while advance repayments cover scheduled amounts. A support arrangement can therefore change access without a cash withdrawal.
Why Your Available Redraw Changes
Your available redraw can fall even when you have not withdrawn money. Scheduled repayments can use up the amount you paid ahead if you reduce or pause new payments. Fees charged to the loan can also reduce how far ahead you are.
Lender recalculations are another cause. CommBank explains that available redraw can reduce over the loan term through monthly adjustments. Its available amount also excludes money reserved for the next minimum repayment for weekly and fortnightly direct debit payers.
If the amount changes unexpectedly, compare your latest statement with the previous repayment date and any fees or adjustments. Ask the lender to identify the calculation or access restriction if the statement does not explain it. A hardship hold changes what you can access and does not necessarily mean the same amount has been withdrawn.
It depends on your lender's rules whether advance repayments can cover upcoming mortgage payments. An approved repayment holiday can use them, but a displayed redraw balance alone does not cancel your next direct debit. Arrange a repayment change before stopping payments.
Redraw Versus Offset
Redraw money has reduced your loan debt, while an offset balance remains in a separate linked transaction account. Both can reduce interest, but their access rules and tax consequences differ.
An offset account reduces home loan interest without paying the account balance into the loan. Transaction access can suit salary deposits and everyday spending. Redraw requires an eligible withdrawal from the loan and can have minimum amounts or processing delays.
Compare the full loan cost, including any offset account or package fee and the interest rate. A fee-free redraw facility does not establish that its loan is cheaper overall.
Offset suits money you move frequently or need for daily expenses. Redraw can suit deliberate extra repayments you expect to leave in the loan, provided you accept its access conditions. For the wider decision, read how to choose between offset and redraw.
The Tax Point Brokers Must Flag
A redraw is a new borrowing, and the use of the redrawn money determines whether its interest is deductible. The Australian Taxation Office explains this in TR 2000/2, particularly paragraphs 22 to 25.
Redrawing from an investment loan for a private holiday creates a private portion whose interest is not deductible. Mixed-purpose loans require ongoing interest apportionment. Withdrawing your own cash from an offset account is not a new borrowing and does not itself change the linked loan's purpose.
Before an investor uses redraw, refer the intended use and transaction history to their tax adviser. The same question matters if an owner-occupied home will later become a rental.
Refinancing and Term Effects
When you refinance, extra repayments have already reduced the debt being paid out. Available redraw is not a separate cash balance that automatically transfers to the new lender.
You can refinance the reduced outstanding balance or seek approval for a larger new loan that preserves access to cash. Including the redraw amount in that larger borrowing increases debt again. The new lender's approval and product rules decide whether that money is available as cash, redraw or another agreed arrangement.
For example, a hypothetical loan has $300,000 outstanding and $20,000 available redraw. Refinancing $300,000 replaces the debt without providing a separate $20,000 payment. Borrowing $320,000 would retain $20,000 in cash only if approved and released that way, before interest, fees and settlement adjustments.
When the loan is fully paid off and closed, redraw access ends. The unused amount has already helped reduce what you owe. If you need cash after settlement, arrange it before payout instead of expecting a refund of unused redraw.
Frequent redraws reverse the interest benefit of extra repayments because the withdrawn amount becomes interest-bearing debt again. Compare the new repayment and remaining term before refinancing your home loan, especially if a longer term makes repayments look lower.
What to Do Next
At your next client review round, identify loans with usable redraw and split the files into owner-occupied and investment loans. For owner-occupied clients, compare the accessible buffer with upcoming expenses and the lender's withdrawal conditions. Flag any plan to rent the property out later.
For investor files, record the intended use before a redraw and refer any private spending or mixed-purpose balance to the client's tax adviser. Raise offset as an option for savings the client expects to spend. Keep the lender's explanation of changing redraw availability with the review notes so the client understands which funds remain accessible.
