A redraw facility is a feature of some home loans that allows you to access extra principal repayments you’ve made on your home loan.
For example, if you pay $200 a month more than your minimum monthly repayment covering principal and interest, then at the end of the year, you will have $2400 sitting in your redraw facility. Any lump sum payment made in addition to your required home loan repayments also goes into your home loan redraw.
The facility allows you to take back or “redraw” this money down the track.
Lenders take into account the money in your redraw facility and calculate interest on the principal amount minus the money in your redraw, potentially saving you thousands of dollars over the life of the loan.