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A redraw can be a great way to put extra funds aside for a big expense, such as paying off other debt, renovating your home or planning a holiday.
We explore the differences between redraw and offset accounts, and how both can be used to save you money.
A redraw facility allows you to deposit extra money into your home loan account. This counts against your home loan balance, reducing your interest payments. If you need this money down the road, you're then able to withdraw these funds.
Let's say your minimum monthly repayment is $2,500 but you've been paying an additional $500 each month. After 12 months you would have an additional $6,000 in your home loan that would be available for you to access.
It's important to note that the amount available for redraw includes only the extra payments – not the scheduled mortgage repayments.
Estimate your monthly mortgage repayments with the HSBC Home Loan Calculator.
Redraw and offset are features commonly offered with home loans. While both can help you save on interest payments and pay off your loan faster, they work differently. What you choose will depend on your financial circumstances and goals.
Learn more: What is an offset account?
Using redraw facilities can save you money and give you access to extra funds, but here are some things to be aware of:
Interest is calculated on loan principal minus the extra payments made. If you draw down on the additional payments you've made, you may see your interest charges go back up.
Redraw is a feature of your home loan, not a separate account. If you have a variable rate loan, you can take out your available redraw amount at any time, unless you're in default of the agreement (for example, you miss a periodic payment). You can access this money by moving it to your transaction account first. Redraw is not available for fixed rate loans.
If you have an investment loan, then mixing personal and investment redraws can make it harder to claim interest as a tax deduction. Speak to your accountant to understand how this might impact you.
At HSBC, there's no minimum amount for redrawing and no fees. Most variable loans, except construction and bridging loans, will allow you to redraw extra funds. You can check your available funds under your home loan account in the mobile banking app or through online banking.
Redraw can be done via:
You can access your redraw funds immediately to make payments or set up direct debits. They can also be transferred to another HSBC account or bank.
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This article is intended to provide general information of an educational nature only. This information should not be relied upon as financial product advice as it does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of the information to your own circumstances and seek independent legal and financial advice prior to making any investment choice. There are risks associated with any investment and this document is not intended to list all of them in respect to any particular investment opportunity. Prices, levels and indications contained in this document are illustrative only and may not represent future performance. HSBC does not warrant or represent the performance of any investment opportunity.
Disclaimer: Credit provided by HSBC Bank Australia ABN 48 006 434 162. AFSL/Australia Credit Licence 232595. Home Loan Terms, Personal Banking Booklet, Fees and Charges and lending criteria apply. This article does not take into account your personal or financial situation. Please consider a relevant Product Disclosure Statement, available at hsbc.com.au or by calling 1300 308 008 before making a decision about this product.
