Rounding up Redraw Requests

– the true cost of adding a little extra!

It’s that time of year again, nearing the end of winter and the wardrobe needs a little refresh, so you want to get yourself or the kids a few new items. You think you’ll need around $170, but you request a redraw of $200 just to make sure you cover everything. Sound familiar?

It seems relatively harmless, but what is the real cost of “rounding up” your redraw requests?

Let’s do some numbers! Let’s say you request a once-off redraw every two weeks. Our clients will on average ask for an additional $30 more than they really need every time they request a redraw. That’s on average an additional $780 a year that is taken out of your home loan where it could be working for you. Once you add interest, that’s around $819 a year of wasted money! Over the life of a loan, that’s around $12,285… not so harmless anymore.

How can you avoid it?

Be specific about the money that you need. If you have a Physio appointment, find out exactly what the consultation fee will be and request that. If it’s $135, request $135 – not $150! If you have several bills that have popped up at once, when you request them make sure to put the specific amounts in your email.

If you really aren’t sure how much you’ll need, either take the extra funds out of your weekly living allowance, then request a redraw after the event to replenish your bank balance, or request the additional funds and then transfer any surplus back to your loan account as soon as possible. This is a harder one to stick to, as it’s human nature to spend what we have access to, but it’s worth it in the long run!

Try to have ALL of your bills direct debited directly from your home loan account. This has several benefits:-
• The money will be direct debited on the day that it is due, not before, meaning the money sits in your home loan account working for you for as long as possible
• The direct debit will be for the exact amount of your bill, no wasted money!
• One less administrative thing for you to have to worry about

Why is it so important?
It may seem pedantic that we’re talking about $30 a fortnight, but as you can see the money really starts to add up over time. What we’re really asking you to do is be more conscious of your spending. If you can become more aware of exactly where your money is going and really see the value of keeping as much of your money sitting in your home loan account for as long as possible working for you, you’ll accelerate your debt reduction goals. It’s about shifting your whole mindset… every dollar counts! That’s how we get our Clients to pay a 30 year home loan off in half the time!

*Comparison rates are calculated on the basis of secured credit of $150,000 over a 25 year term. Please note this comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.