20 Apr Redraw facilities and dangers during family law disputes
Redraw facilities benefits
A home loan with redraw facilities is a popular choice for many home buyers. It allows you to make extra repayments and gives you the option of withdrawing those extra repayments at a later date if you need the funds.
Usually redraw facilities are only available with variable interest rate loans, as other types of home loans like fixed interest rate home loans or basic home loans do not give you the option of making extra repayments. After the extra payments are made they just accumulate less any monthly payments. The surplus is available to “re draw” and acts like a low interest credit card. Many couples use it instead of high interest credit cards for day to day expenses to draw off instead of a savings account.
A home loan with redraw facilities can give you almost instant access to your money when you need it – say your fridge goes on the blink or your car needs some major repairs, you’ll know you can get at your money right away. It’s easy credit available any time.
Redraw facilities dangers
When you are separating from your spouse don’t forget about the redraw facility. If your spouse is authorised to take money from the redraw facility and you don’t trust them, you should contact the bank and advise that you want a freeze on unilateral withdrawals and only authorise withdrawals with your consent. This is especially important if your spouse is a gambler or is likely to waste the money just to spite you.
Redraw disaster case study
In one case the available redraw money was taken by a husband leaving the home 100% hocked up in debt. The house value had declined. The wife was forced to sell the home. The sale proceeds after agents sales commissions and outstanding rates were not enough to cover the mortgage debt. The property passed to the new owners and the wife had to find somewhere to rent.
The bank still chased the wife to pay the remaining debt. In the meantime the Husband had gone overseas taken the $120,000 from the redraw to an unknown destination. He had also withdrawn his super on the basis that he told his super fund he was not returning to Australia. The redraw facility and the super funds were the only assets of the marriage. By the time the wife had gone to see a lawyer it was too late. You can see how sometimes it is better to be careful than sorry.
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