A redraw facility allows you to make extra repayments towards your home loan in addition to your minimum repayments.
The main advantages of a redraw account is that you can make extra repayments to reduce your interest on your home loan whilst also withdrawing these extra repayments if you wish to do so. This could be advantageous if you require a large sum to do renovations, in an emergency or for a large bill, etc. It can also be a great alternative to borrow from your redraw compared to other debt options (credit card, personal loans).
Whilst a redraw can sound attractive, there are also other variables to consider. There may be fees and restrictions on amounts you can withdraw; this could be problematic in emergencies. Depending on your savings capacity, your lender may also have restrictions on the amount of extra repayments you can make into your redraw. Overall, a redraw account can also be less flexible than an offset account.
Lastly, your lender can change terms and conditions at any time, meaning you could lose access to your funds in your redraw. This happened to customers with ME Bank back in 2020, see article for further details.
Consider the following when looking at a redraw facility: