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Redraw has been growing in popularity for Australians since the 1990s, according to the ABS. An Australian Social Trends 2014 report prepared by the ABS has found the increased use of home equity loans, redraw and offset accounts have allowed households to build mortgage buffers, ‘enhancing their ability to cope with income shocks’.

Robin Lim, head of mortgages product management at National Australia Bank says ‘redraw is effectively how much you can draw on your loan … it is calculated based on the difference of your schedule, or how much you are required to pay over the life of your loan, and how much you may be ahead of your repayments.’

Redraw has been growing in popularity for Australians since the 1990s, according to the ABS. An Australian Social Trends 2014 report prepared by the ABS has found the increased use of home equity loans, redraw and offset accounts have allowed households to build mortgage buffers, ‘enhancing their ability to cope with income shocks’.

Robin Lim, head of mortgages product management at National Australia Bank says ‘redraw is effectively how much you can draw on your loan … it is calculated based on the difference of your schedule, or how much you are required to pay over the life of your loan, and how much you may be ahead of your repayments.’

Domain’s senior economist Dr Andrew Wilson says: ‘Redraw means using the existing equity in your property as a redraw, as a financial resource. That’s a good thing for everyone. You’re on a mortgage, your repaying your property, your equity is increasing, so it’s a good thing to have that capacity to have access to that capital you are your accumulating in your home.’

Wilson explains that strong prices growth in property markets such as Sydney and to a lesser extent Melbourne has meant more Australian’s can access their equity. ‘It gives home owners the capacity to access those funds without taking out a second mortgage.’

Robin Lim says it is important to understand the ways you can access redraw facilities. Perhaps the ease with in which Australian’s can now tap into their capital through internet banking, ATMs or even directly at the bank branch has been why this has become a trend.

Whilst your bank might have these options available, it’s also good to know if you’re entitled to this service with your current home loan product. ‘[It’s] good to remember,’ Lim says ‘some products do allow redraw and others don’t.’

‘Fixed-rate home loans, you might not have the ability to make additional repayments, which means you don’t have the ability to redraw on that loan. On a variable loan, you do have the ability to pay ahead of the curve which means you can redraw on your home,’ he says.

‘It is important to realise that when you redraw your home loan, you are actually drawing on more debt,’ says Robin Lim says.

Household debt came in at $79,000 per capita in 2013, according to the ABS Social Trends 2014 report, that’s $1.84 trillion nationally. It’s important to talk to your financial provider regarding redrawing loans from your current home loan.


Posted by Cassandra Byrnes – Domain (Fairfax) on 12th October, 2015