Home loans with no minimum redraw amount
There are always going to be times when you need some extra money for essential things, so a home loan with a redraw facility is an option to consider if you want to have some ready cash to hand if needed. Most redraw facilities place a minimum limit on the amount of funds you can withdraw, but home loans with no minimum redraw amount can give you more flexibility.
What are home loans with no minimum redraw amount?
When you take out a home loan with a redraw facility you have the opportunity to pay off your debt more quickly by making extra repayments on top of your usual monthly mortgage payment. When you make additional repayments the principal sum is reduced and you could pay off your loan more quickly as interest is also reduced. A redraw facility also allows you to withdraw extra repayments, not payments made to the original loan. Home loans with no minimum redraw amount allow you to take out whatever you need without having to comply with a minimum amount requirement.
How do home loans with no minimum redraw amount compare to other products?
Access to the extra repayments you have made to your home loan is a key area to be clear about. You should investigate how many redraws you can make per year and see if there is a set number of free redraws and what the fees are for additional ones after the free ones have been made. You may want a debit card with the loan to access your funds, or have a lender that has online services or a mobile app facility so you can redraw funds using those.
What are the main features of home loans with no minimum redraw amount?
Ease of access to any extra repayments you have made and the fact that you can take out as much or as little as you want are main features of this type of loan. Home loans with no minimum redraw amount are usually associated with variable rate mortgages, so you should keep a sharp eye on interest rates and watch for signs that they may move up or down. Interest rates may remain static for some time, or reduce minimally, but it depends on the volatility of the economy and what central banks determine in terms of interest rate policy. It's always worth looking for a competitive interest rate and low fees for this sort of home loan.
Are there risks to consider?
You should be clear about the number of times you can make withdrawals. There may be limits as to the frequency and you could also incur fees for the service. You could also risk eating away at the extra repayments you have made, so the interest you will be paying on the loan may gradually increase. On the plus side you don't have to withdraw what the lender stipulates as the minimum amount, which could be as much as $1,000. It gives you more freedom, an extra financial cushion, and the ability to decide how much you want to take.