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What is a redraw facility on a home loan?

Fixed and variable home loan redraw facilities give you the freedom to get ahead on your home loan and save interest by making extra repayments, which you can withdraw (redraw) later, if you need the cash. Some other lenders won't let you redraw from a fixed rate loan, but with Westpac, you can.


The benefits of a home loan redraw facility

  • Pay off your home loan sooner.
  • Build your redraw balance by repaying more than your minimum monthly amount.
  • Variable rates often come with unlimited extra repayments.
  • Dip into your spare money, if you need it.
  • Some lenders also let you redraw extra repayments from your fixed home loan.


What you get with Westpac

  Extra repayment Redraw
Variable loan limit Unlimited Up to $100k daily (unlimited in-branch)
Fixed loan limit $30k total during your fixed term
(if exceeded, break cost1 may apply)
$30k total during your fixed term
Fee $0 $0

Another Westpac benefit: if you have our split loan, you can shift your funds ‘available’ for redraw into whichever fixed or variable account has the higher interest rate at the time... to pay less interest.


How a redraw facility on a home loan works

If you’re comfortably managing your home loan repayments, then a redraw facility could work for you. By increasing your fortnightly or monthly payments above the minimum, or making one-off extra payments, you could enjoy a number of benefits.

Any money you transfer to your home loan balance in addition to your regular minimum monthly repayments counts against the amount you owe on your home loan when your bank calculates interest charges. This has the effect of reducing the amount of interest you pay on your home loan.

The other advantage should you need to access this cash, you can withdraw those extra payments by transferring them to your transaction account.

With a Westpac fixed rate home loan, you can make additional repayments and redraw up to $30,000 over the loan term before break costs apply1. With a variable rate home loan you can repay and redraw up when it suits you with no redraw fees or potential break costs.


How to redraw

Your lender will have their own redraw limits and steps. Check with them first as you may need to activate your redraw facility, and if there are daily online or in-branch redraw limits, you may need to redraw over a number of days.


At Westpac, simply sign in and select your home loan account, then select Transfer to move funds to a Westpac account, or select Pay to transfer to another bank account.

Haven’t set up your redraw?

To activate redraw, sign in and go to Home loan settings, then Manage redraw and follow the instructions. Or fill out the Redraw Authority form (PDF 66KB) and return it to your nearest branch. Redraw activation can take up to 1 day online and up to 1 week after receiving your form. 


How interest is calculated

Interest on your home loan is usually calculated on your outstanding balance each day and then charged monthly. If you reduce your outstanding balance even for just one day, the amount of interest you pay will also go down.

Extra repayments held in your redraw facility balance against what you still owe on your home loan – this lower figure is what your bank will use to calculate interest charges on your loan.

Redraw facility example 

You have a $535,000 loan amount on your first home. The interest rate is 6.09% and the comparison rate is 6.42%.

Your minimum monthly repayment is $3,239 – but you decide to pay an extra $200 per month into your redraw facility by direct debit.

Over the course of a year, you’ve made additional payments of $2,400.

You can leave these additional repayments, reducing your loan balance and the amount of interest you’ll pay. Or, you can use all or some of your $2,400 available redraw to spend as you wish – for example, to pay for renovations or to pay off your credit card. Note that this will increase the amount of interest you pay on your home loan.


Redraw facility or offset account?

Whether you choose to only use your redraw facility or add an offset account linked to your home loan depends on your personal circumstances. Both can help you make interest savings and pay off your home loan faster.

The main differences are how you deposit and access extra funds.

With a redraw facility, you can only access the extra funds by transferring them to a transaction account that will let you withdraw them or use them to make payments. An offset account is like an everyday transaction account, allowing you to withdraw and pay for things without having to transfer funds.

If you want to be less tempted to spend your extra cash and focus on paying off your home loan, you may prefer a redraw facility with its slightly more restricted access. If you want greater flexibility and access to your additional funds, an offset account might suit you better.

Combining a redraw facility and offset account

Some variable home loans allow you to have a redraw facility and an offset account, so you can enjoy the best of both worlds.

You can use the offset account for paying in things like your salary and withdrawing money on a regular basis, and the redraw account for making regular deposits.

Redraw facility or savings account?

Depositing into a home loan’s redraw facility is different to depositing into a separate savings account. It’s important to consider the differences when deciding which is right for you.


Four main differences between a redraw facility and a savings account

  1. Interest: a savings account pays interest on the amount deposited. A redraw facility doesn’t pay interest – it reduces the interest payable on your home loan.
  2. Amount of interest: home loan rates are generally higher than most savings and term deposit rates. Depositing into a redraw facility is likely to result in a greater interest saving on your home loan than the amount of interest paid on a savings account. Make sure you check and compare the rates before deciding.
  3. Savings account limitations: some savings accounts have minimum deposit requirements or tiered interest rates, which may mean low balances receive little or no interest. On the other hand, every cent you keep in your redraw facility (of an offset account) will help you save interest charges on your home loan.
  4. Tax liability: interest earned from savings accounts are usually considered taxable income, but interest savings on your home loan are not2. For any questions about your personal tax situation, we suggest talking to the Australian Tax Office, or your financial advisor.

To sum up

  • You can increase repayments and make one-off payments to increase the balance in your redraw facility
  • You can access or ‘redraw’ those extra repayments if you need cash
  • Money kept in a redraw facility reduces interest payments
  • A redraw facility can help you pay off your home loan sooner by saving you interest
  • An offset is similar to a redraw facility, but makes it easier to access additional funds
  • A redraw facility may save more interest than a savings account pays you.

Choose the right option for you

Choosing the right kind of home loan is an important decision, so it’s worth doing your research and getting independent financial advice.

For example, if you’re thinking of fixing all of your current Westpac variable home loan, it's important to consider what you’d like do with any funds available for redraw on your home loan account. Read more on fixing your variable home loan.

If you have any questions about a redraw facility with Westpac, or any of our home loan products, request a call back and talk to a Home Finance Manager about your options.

Other guides to help

Our home loan offset account

Discover what an offset account is and how much home loan interest you could save, with our video, examples, articles and FAQs.


Redraw vs. offset

Adding a redraw facility or an offset account to your home loan can help reduce your interest payments. Find out how they differ and see which one could suit your needs best.


How to refinance a home loan

Refinancing your home loan may be very rewarding. It could help you take advantage of a lower interest, reduce repayments or borrow money for things you might need.


Things you should know

Conditions, credit criteria, fees and charges apply. Residential lending is not available for Non-Australian Resident borrowers.

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information and if necessary, seek appropriate professional advice. This includes any tax consequences arising from any promotions for investors and customers should seek independent, professional tax advice on any taxation matters before making a decision based on this information.

Key Fact Sheet for Home Loans

1Break costs on fixed loan prepayments and switching: customers can make total prepayments of up to $30,000 (cumulative) for fixed loans, without costs or fees applying. You may incur a break cost and administration fee if your prepayments exceed this threshold, or if at any time before the end of a fixed rate period you switch to another product, interest rate (fixed or variable) or repayment type.

2 The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation.