Calculator
Redraw Facility Calculator
Redraw Facility Calculator
A redraw facility holds extra repayments inside the loan: they cut the interest immediately but stay retrievable if you genuinely need them. The catch is access — most lenders charge or delay redraws, and once money leaves the loan it cannot come back tax-free if the property later becomes a rental. Re-drawing for spending re-contaminates that deductibility.
Interest Saved Over Window
$21,939.67
Facility Analysis
Paying an extra $500 a month builds a redraw pool of $60,000 within 10 years and saves $21,939.67 of interest along the way. Every redrawed dollar earns the loan rate, guaranteed — equivalent to a taxable investment paying about 8.8% at your marginal rate. The redraw path wins: the same money saved $11,332.33 more than a taxable savings account over 10 years, because the loan rate beats what the savings account pays after tax.
*Assumes a standard amortising loan with constant rates; redraw fees, access conditions and lender policies vary by product. Tax treatment of re-drawn funds depends on the property's use. Educational only, not financial or tax advice.
Extra Repayments You Can Get Back — With Strings Attached
A redraw facility is the middle path between paying your home loan down and keeping money accessible: every extra repayment above the minimum reduces the balance and the interest immediately, but accumulates as a pool you can draw back out if life genuinely demands it. It feels like a savings account attached to your mortgage, and in cash terms it behaves like one that pays the full home-loan rate — better than almost any deposit account once tax is considered. Australians tend to meet redraw and offset accounts at the same lender meeting and assume they are interchangeable. They are not. An offset account is a separate transaction account whose balance simply cancels loan interest dollar-for-dollar; the loan itself never changes. Redraw sends real payments into the loan — the interest saving is identical, but the money now belongs to the bank's ledger, and getting it back depends on the lender's approval, potential fees and processing days. For owner-occupiers the bigger difference only appears later: if the property becomes a rental, money sitting in an offset stays flexible while a redrawn dollar that funded private spending permanently contaminates deductibility, because redrawing for personal use is treated as fresh borrowing for a personal purpose. This calculator prices what the facility actually earns you: the interest saved across any window, the pool you would have built, how much sooner the debt dies, and the honest comparison against putting the same money in a taxable savings account.
Two Loans, Same Start, Different Extras
The engine runs two month-by-month simulations of the same loan from today's balance over its remaining term. The baseline pays only the minimum repayment; the strategy adds your extra amount to every payment until the balance clears. Interest accrues monthly on the running balance, so the strategy's savings compound: each early principal dollar stops generating interest for every remaining month, which is why a $500-a-month extra saves far more than $500 times months — on this page's default inputs it saves tens of thousands within the ten-year window alone and shaves years off the payoff date. Three comparisons give the numbers meaning. The redraw pool equals extras times months paid — the maximum you could theoretically withdraw. The taxable-equivalent rate divides the loan rate by one minus your marginal rate, because redraw's interest saving arrives untaxed while a savings account's interest is taxed; matching a 6% loan through a bank account takes roughly 8.6% pre-tax for a 32% taxpayer. Finally the savings alternative invests the same monthly stream at your alternative rate with interest taxed at your margin, and the verdict line compares its after-tax outcome against the interest saved inside the loan. When the loan rate sits near or above plausible savings rates — the usual case — redraw wins decisively; the exceptions are worth seeing rather than assuming.
Expert Insights
Redraw Is a Guarantee Offset Only Mimics
Every extra repayment into a variable-rate loan earns exactly the loan rate, with zero risk and zero tax — no savings account can promise that. Offsets match the guarantee but often carry account fees, tier conditions or apply only to select products; basic loans with redraw frequently price cheaper than offset packages precisely because the flexibility costs the bank less. Price both products' total cost, not just the feature list.
The Deductibility Trap Closes Quietly
Interest deductibility follows the purpose of the borrowed dollars, not the collateral. Redraw $20,000 for a caravan and that slice of the loan is now private borrowing forever — repaying it back does not restore deductibility; only recycling through an offset or a proper refinance structure does. Owner-occupiers feel nothing today and everything later: convert the home to a rental after years of redrawn holidays and a meaningful share of the interest is permanently non-deductible.
Access Is the Feature and the Fee
Read the fine print before treating redraw as an emergency fund: many lenders restrict free redraws to a number per month, impose $50-ish fees per withdrawal, set minimum redraw amounts of $500 or more, or delay processing by business days during exactly the moments you need speed. If genuine instant-access emergency money matters more than the last fraction of a percent, hold a smaller buffer in a high-interest saver and let the rest work inside the loan.
Actionable Tips
- 1
Automate the Extra, Forget the Balance
Set the extra repayment as a standing transfer the day your salary lands, then leave the redraw pool alone. The behavioural failure mode of redraw is not the maths but the temptation: pools that took five disciplined years to build have vanished in one renovation spree. If willpower is doubtful, an offset with no linked card keeps money visible-but-separate instead.
- 2
Check Your Lender's Redraw Rules Today
Before committing, note three things from your product disclosure: minimum redraw amount, fee per withdrawal, and processing time. Then stress-test your plan against reality — a facility charging $50 with a $1,000 minimum turns frequent small withdrawals into poor value and quietly discourages legitimate access.
- 3
Plan the Rental Conversion Before You Need To
If there is any chance the home becomes an investment property later, prefer an offset now: keep the loan balance pristine and your savings parked beside it, preserving the ability to claim interest in full and release equity cleanly. Switching structures later costs refinancing fees and cannot undo historical contamination. The calculator's comparison shows the tiny interest difference you are paying for keeping that door open.
Real-World Examples
Michael Built a Buffer Without Noticing
Michael rounded his $2,900 minimum repayment up to $3,400 on a $500,000 loan and forgot about it. Five years later the redraw pool held $31,000 when the car died and the roof leaked in the same quarter — he drew $18,000 rather than touching a credit card, and the loan was still two years ahead of schedule. The facility cost him nothing and had quietly replaced the emergency fund he never got around to opening.
Sophie Chose Redraw Over Offset and Kept the Difference
Sophie's bank quoted a professional-package loan with an offset at 6.24% or a basic variable with unlimited free redraw at 5.89% — a $175-a-month difference on her balance. Modelling both here showed redraw's slightly slower effective paydown was swamped by the rate saving. She took the basic loan, automated the extras, and treated a separate bonus-saver account as her true emergency buffer.
The Nguyens Learned About Contamination Early
The Nguyens planned to convert their townhouse to a rental within three years and had been redrawing Christmas trips and car deposits for two. Their broker ran the numbers: nearly $40,000 of the loan was now private-purpose borrowing, permanently unclaimable against future rent — roughly $2,300 of deductions gone every year for decades. They stopped redrawing immediately, moved their buffer to an offset on a refinanced split, and preserved most of the loan's future deductibility before the conversion.
Glossary of Terms
- Redraw Facility
- A loan feature letting you withdraw accumulated extra repayments; the money reduces interest while it stays in, but access terms are set by the lender.
- Offset Account
- A separate savings account whose balance is subtracted from the loan balance for interest purposes — functionally similar to redraw, but the money never leaves your ownership.
- Debt Recycling
- Repaying non-deductible home-loan debt and re-borrowing (via offset or refinance) to invest, converting private interest into deductible investment interest over time.
Frequently Asked Questions
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.