Useful Tips

How to make the most of a Free Redraw loan

Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.

What you need:

  • A Home Loan with Free and Unlimited redraw
    • (It must be an owner occupied debt)
  • A transactional bank account
  • A credit card

What to do:
Work out how much ‘cash’ you need each pay period ($A).

Get your payroll department to deposit $A into your bank account and the balance into your Home Loan.

Pay as many bills as possible by credit card.

Redraw from your loan to pay your credit card and other bills as required.

The rules:

  • Funds can only be transferred from your Home Loan into your linked bank account, unless your loan gives you access to something like BPay.
  • Direct debits cannot be set up from the Home Loan.
  • You must make payments into the loan that are equal to or greater than the minimum monthly repayment amount.
  • The redraw amount will reduce on the monthly repayment date by the value of the minimum monthly repayment.

Consider transferring any savings you may have into your Home Loan.

Here is a demonstration of how this might work for someone on $50,000 wages with $10,000 in savings:

Interest Rate Bank Account Home Loan
Interest Rate 5% 7%
Interest received (saved) pa $500 $700
Tax paid $157 nil
You get (save) $343 $700