Taking Advantage of a Home Loan Redraw
Home loans are evolving to be better products that would further entice borrowers. It is not surprising that every home loan now offers and implements innovative and outstanding features, which make it all the more exciting and beneficial. Among the most sought-after features of mortgages now is the redraw facility.
A redraw facility is a feature that allows borrowers to make additional payments. Why would you prefer to make extra payments? Here is the catch. The amount you pay each month on top of the minimum required payment for your home loan could serve just like your typical savings. You could possibly redraw a part or all of the accumulated extra payments in the future if you need to.
It is not surprising that the redraw facility in every home loan is becoming more popular. It could be an ideal feature that could help you not just speed up your mortgage repayment but also access money during emergencies. It is truly beneficial.
A home loan redraw facility allows you to lower your overall interest payable over the entire duration of your mortgage. This is possible because you make extra payments that could deplete your principal amount. Thus, if you make an additional $3,000 in repayments in a year, you have just lowered the principal of your home loan by that amount. By that, you also reduced your interest payment on your home loan.
The other main advantage is that you get access to the fund accumulated on your extra payments whenever you are in need of cash. If you intend to use the amount on your holiday vacation or to pay other debts, you could be sure you have an accessible fund that you could use. This makes the home loan redraw facility ideal for saving money for various purposes.
What to look for
Many mortgages come with redraw facilities. A redraw feature of a home loan could be different compared to another redraw facility of another. That is why you could carefully consider the right one for you. Not all redraw facilities are ideal and are recommended.
The first consideration you should look at would be the activation fee involved. Some lenders charge up to $300 to start up a redraw facility. Shop around to find a redraw feature that comes with a lower starting fee. You could still find and get the best deal out of all available redraw facilities in the market.
Some loan providers offer free redraws every year. That means you do not have to shoulder start up fees just to have the redraw facility set. However, you could be charged for redrawing money from your home loan account. It could range from $10 to $50 for every redraw.
When choosing the best home loan redraw facility, there are other considerations to take. Is there a minimum or maximum amount set for redraws? Could you access unlimited redraws within a year? How often are you allowed to redraw? Such questions could serve as your additional guide.
Andrew has been working in the finance industry for several years. Andrew can help you get the best Private Lender.