One of the easiest ways to get ahead with your home loan – and pocket big savings on loan interest, is to pay a bit extra off your loan either through lump sum payments or by adding to regular repayments.
But what if you need funds in an emergency? That’s where redraw comes in, letting you withdraw those extra payments when cash is needed.
The benefit of paying a bit extra.
When you take out a home loan, we’ll let you know the regular repayments you need to make. But if you have a variable rate loan, you’re free to pay a bit extra, and it can certainly be worthwhile.
No matter how small your extra payments, the money comes straight off the loan balance. This reduces the interest component of your next repayment, so even more money goes towards whittling away the loan balance.
In this way, extra repayments can slash years off the time taken to pay off your loan – and see you pocket big savings in interest charges in the process.
Look for fee-free extra payments.
The key is to look for a home loan that lets you make fee-free extra repayments. That’s certainly the case with a Defence Bank variable rate home loan – it costs nothing to pay a bit more and get ahead with your loan.
Use our free repayments calculator to see how much you could save with additional payments. On a variable rate loan, you can choose to make one-off payments when you have a bit of spare cash available (like a tax refund). Or you can choose to pay more off your loan by upsizing your regular payments.
Redraw lets you withdraw money when it’s needed.
The beauty of redraw is that those extra repayments are not locked away. If you’re ahead with your loan, redraw lets you draw additional payments back out of your loan if you face an unexpected bill or need money in an emergency.
While limits may apply to how much you can withdraw in a single transaction, redraw shouldn’t cost you anything. Some banks impose fees for redraw. A Defence Bank home loan redraw is fee-free (minimum $100).
The impact of redraw.
Drawing money back out of your home loan will impact the savings you make on extra payments. That’s because each withdrawal pushes the balance of your loan back up, which in turn increases the monthly interest cost.
This can make it worth using redraw sparingly and having separate savings set aside for everyday use. Following a household budget makes it easier to plan ahead for major bills and expenses – our Budget Planner is a handy tool to get started.
How to withdraw cash using redraw.
Most variable rate Defence Bank home loans have an online redraw facility. So you can organise a withdrawal in a matter of minutes.
Important note: This information is of a general nature and is not intended to be relied on by you as advice in any particular matter. You should contact us at Defence Bank to discuss how this information may apply to your circumstances.