Redraw
Many house loans now include either an offset account, a redraw option, or both. If used correctly, both of these features can provide borrowers with flexibility and possible financial benefits.
Redraw allows you to access additional principal payments made on your loan. This could come in handy if you ever need some extra cash.
How does the redraw feature work?
Once you’ve established a routine for paying off your first mortgage, you may want to increase your regular payments over the minimum. Alternatively, you can also make additional payments from time to time. By contributing a little more, you may be able to pay off your house loan sooner by lowering the interest charged throughout the term of the loan.
However, life throws several surprises. Your vehicle may decide to pack it in. Or maybe you’re just in desperate need of a vacation. This is where a redraw feature could come in handy.
If you’ve been making additional payments on your mortgage, a redraw facility allows you to take those excess payments back and utilize them as you see fit.
Here's an example.
Assume your mortgage’s minimum monthly payment is $2,000.
You decide to pay an extra $200 per month, totaling $2,400 in a year.
This additional $2,400 may be available for withdrawal at a later date.
How do I redraw my money?
Redrawing funds from a qualified home loan is usually simple. While each lender may have various alternatives, most will allow you to request a redraw via online banking, phone, or branch visit
The minimum and maximum redraw amounts fluctuate amongst lenders.
Offset
An offset account is a transaction account that is tied to your mortgage. You can deposit and withdraw funds from it just like a conventional transaction account.
The main distinction is that by accumulating funds in an offset account over time, you can minimize the amount of interest charged on your house loan. The greater the sum and the longer the term, the lower the interest rate. This may allow you to pay off your loan sooner.
In general, the offset option is only accessible on variable-rate mortgages (although some lenders offer an offset feature on selected fixed-rate home loans).
How does an offset account work?
Assume you get a $500,000 home loan.
You then make a $20,000 deposit into your offset account.
You will now be charged interest on $480,000 rather than the entire $500,000.
This will continue as long as $20,000 remains in your offset account.
FAQs
Got questions? Find answers to some of the most commonly asked questions about our financial solutions, processes, and services to help you make informed decisions.
LMI is a third-party insurance premium payable by you as the borrower, to protect the lender against the potential loss of money if the borrower is unable to repay the home loan. Generally, an application with a Loan-to-Value Ratio (LVR) of 80% or more may result in the borrower having to pay Lender’s Mortgage Insurance.
Extra payment is an excellent feature of a good mortgage deal. Here, your lender lets you make lump-sum additional payments along with your regular monthly payment. Making extra payments allows you to shorten the length of time you are paying your mortgage. Since your balance is being paid off faster, you will also have fewer total payments to make, thus lowering your interest. At Reliiance Financial Solutions, we can help you find the most suitable mortgage deal for you. We have a range of lenders that allow you to make as many extra repayments as you want, whenever you want, without attracting any penalties.
Stamp Duty is a government tax imposed on contracts, with the amount usually calculated as a percentage of the contract value. In layman’s terms, it is the tax charged for your legal documents to be ‘stamped’.
If you are planning to buy a property, it’s crucial to factor your State’s Stamp Duty into your budget.Chances are, based on your circumstances and state of domicile, you might be able to obtain a stamp duty exemption, or concessions (discount) against the purchase of your first home. Stamp duty laws get changed often, so be sure to check your State Government’s website for the most up-to-date information.
Did you know that some lenders would allow you to cash out any extra repayment you made whenever you need the money? You read that right. This useful mortgage feature is called “redraw facility”. You can withdraw any extra repayments or lump sum payments you make over the life of the loan. At Reliiance Financial Solutions, we will explain all mortgage products to you, including those which allow you to the redraw option.
Testimonials
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