Redraw facilities are a handy tool for many homeowners managing their home loans, but not everyone knows exactly how to use them. A common question we normally get is whether you can use the funds in your redraw account to pay your mortgage. The short answer is yes, but it comes with a few caveats. In this article, we’ll dive deeper into how redrawing to pay your mortgage works, when it might be a good idea, and the factors you need to consider before taking this step. Whether you’re a savvy borrower or just exploring your options, here’s what you need to know. Can you use your redraw to pay your mortgage? Yes, you can use the funds in your redraw account to make mortgage payments. Since a redraw facility allows you to access the extra repayments you’ve made on your home loan, you can tap into these funds when you’re short on cash or looking to reduce your immediate financial burden. However, this is not the same as skipping a repayment. You’re essentially withdrawing your own extra payments to meet the lender’s repayment requirements. Does redraw reduce payments? Technically, redrawing doesn’t reduce your regular repayment amount. Lenders typically set minimum repayment amounts based on your loan terms, regardless of how much extra you’ve paid into the loan. Here’s what happens instead: Interest savings: By redrawing less and leaving more in the loan, you keep your balance lower and save on interest. Short-term cash flow: Redrawing gives you temporary financial relief, but it doesn’t change your obligation to meet monthly repayments. If you’re looking to permanently reduce your repayments, refinancing or restructuring your loan might be better options. Also Read: Why is my redraw amount reducing? Should you use your redraw to pay your mortgage? Using your redraw to make mortgage payments can be helpful in specific situations, but it’s not always the best choice. When it’s a good idea: Short-term financial strain: If unexpected expenses arise and you’re struggling to meet repayments, a redraw can provide temporary relief. Accessing your own funds: Redrawing is your money, so it can feel less risky than taking on new debt. When to reconsider: Long-term impact: Using your redraw reduces the extra repayments you’ve made, which means you’ll save less on interest over time. Discipline required: It’s easy to dip into your redraw for non-essential expenses, which can derail your financial goals. What restrictions or risks are involved? Before using your redraw to pay your mortgage, consider the potential restrictions and risks: Lender conditions: Some lenders may limit how often you can redraw or charge fees for accessing funds. Loss of buffer: Once you’ve withdrawn funds, you lose the repayment buffer you had, which could make it harder to manage future financial stress. Can the bank take my redraw?: In rare cases, lenders can restrict or freeze redraw access, especially if you’re behind on payments or in financial distress. Always check your loan terms to understand your rights. Things to consider before redrawing on your mortgage Cash flow vs savings: Balance your immediate needs with your long-term interest savings. Alternative options: Refinancing or speaking to a lender may provide better solutions if you’re looking to reduce repayments permanently. Consulting a professional: A mortgage broker can help you evaluate whether using your redraw is the best option for your financial situation. Also Read: What happens to redraw when the loan is paid off? Ready to make sense of your home loan options? Deciding whether to use your redraw to pay your mortgage isn’t always straightforward. At Broker360, our mortgage brokers are here to guide you through your options, helping you make choices that align with your financial goals. Get in touch with us to get started.

When it comes to managing your home loan in Australia, having flexibility can be a game-changer. A mortgage redraw facility is one tool that might be available to you, but many people aren’t quite sure how it works or whether it’s the right fit for their needs. In this guide, we’ll break down what a redraw is, how it works, its pros and cons, and when it makes sense to use one. Whether you’re a first-time borrower, a seasoned homeowner, or even a mortgage broker looking for clarity, you’ll find the answers here. What is a mortgage redraw? A mortgage redraw is a feature some home loans offer that lets you access extra payments you’ve made on your loan. When you pay more than your required minimum repayments, that extra money goes into a redraw account, which you can then withdraw (or “redraw”) when you need it. Think of it as a way to stash away funds while reducing the interest on your loan in the meantime. Example of how a redraw works Let’s say your monthly repayment is $2,000, but you pay $2,500 instead. That extra $500 goes into your redraw account. Over a year, that’s $6,000 you’ve “overpaid,” which is now available for you to access if your home loan includes a redraw facility. How does a redraw account work? A redraw account is linked to your home loan. The extra repayments reduce your loan balance, which means you pay less interest overall. But don’t confuse it with an offset account (which is a separate account). With a redraw, your extra payments are technically tied to the loan, and lenders may have conditions or fees for accessing them. Is a redraw right for you? Determining if a redraw facility is suitable depends on your financial goals and needs. Here are a few questions to consider: Do you tend to make extra repayments on your mortgage? Will you need access to those funds down the track? Are you comfortable with the restrictions or fees that might come with redrawing? Would an offset account be a better fit for your situation? A redraw might be right for you if you want to reduce your loan interest while having occasional access to extra funds. However, if you need more flexibility, an offset account might be worth considering. Related: Can I use my redraw to pay my mortgage? Pros and cons of a redraw facility Pros: Interest savings: Extra payments reduce your loan balance, saving you interest over time. Access to funds: Provides flexibility if you need money for unexpected expenses. Encourages saving: Keeps your extra funds out of sight and helps you resist unnecessary spending. Cons: Limited access: Some lenders may limit how often you can withdraw funds or charge fees for redrawing. Not as flexible as offset accounts: Unlike an offset account, redraw funds are tied to your loan. Conditions vary by lender: Different lenders and banks have their own rules, so you’ll need to check the fine print. FAQs about mortgage redraw Does a redraw account reduce interest? Yes! Since your extra payments reduce your loan balance, they lower the amount of interest you’re charged. How does redraw work on a home loan? Extra repayments reduce your principal balance, saving you interest. You can withdraw these funds when needed, subject to your lender’s conditions. What happens to redraw when the loan is paid off? Your redraw balance is usually credited back to you when your loan is fully paid off, but this can vary depending on your lender. Related: What happens to redraw when a loan is paid off? Things to keep in mind when redrawing on your mortgage Understand the lender’s terms: Check if there are fees or limits on withdrawals. Plan your finances: Redrawing funds could increase your loan balance, so make sure it’s a necessity. Speak to a mortgage broker: A professional can help you decide if a redraw suits your goals. Ready to make sense of your options? Choosing between a redraw facility, offset account, or other home loan features can feel overwhelming. That’s where a mortgage broker comes in. At Broker360, we’re here to help you navigate the ins and outs of home loans so you can make informed decisions that suit your needs. Don’t leave your home loan to chance—speak with an expert broker today and start making smarter financial moves