Line of Credit Home Loans
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A Line of Credit Home Loan is a home loan with a credit facility that allows the borrower the flexibility to withdraw money from the home loan up to a set amount, usually not in excess of 80% of the value of the property. This type of loan allows for the equity in a property to be freed up in the form of freely available cash.
A line of credit is like having a credit card where you have a maximum spending limit, but the limit you get for a Line of Credit is usually so much higher than that of a credit card. In addition, the Line of Credit Home Loan interest rates are usually lower than that of a credit card. This is like having a credit card with a high spending limit at a lower interest rate which allows easy access to equity in the property. This can be a bit dangerous for those who cannot control their spending habits and all the equity in the home can be quickly used up. However, the flexibility of having money available anytime when needed has its obvious benefits.... and once the loan is set up, there is no time consuming application process to go through.
With a Line of Credit Home Loan, the only repayment that is required to be made is the interest on the outstanding loan balance. Therefore, cash flow can be maximised and monthly payments can be minimised by only meeting the minimum monthly payment requirement of paying the interest on the loan balance. In other words, the principal on the loan is not reduced, thereby minimising the loan repayment. If only minimum payments were made, the principal would never be reduced. Some lenders will impose restrictions after a certain period to ensure that the principal gets reduced after a certain time.
Usually, money is withdrawn by way of cheque book or via the automatic teller machine (ATM). The money can be used to pay for just about anything, including a deposit on another property, a home loan extension, share investment, school & university education, debt consolidation, or any unexpected expenses. Using the money in the line of credit can be a less expensive form of finance than making use of a personal loan or running the credit card. The line of credit can also be used for debt consolidation purposes, with the possibility of reducing interest payments.
The line of credit is secured by way of a mortgage over a property, which can be a residential or an investment property. The loan usually has no set term.
Some Pros
-May be beneficial to those on irregular incomes as repayments can be varied by the borrower as required
-Maximum cash flow
-Great flexibility
-Gives borrower more financial control
-No Time consuming application process when money is needed
-Can make savings on interest payable by using the Line of Credit Loan account as a savings account and loan may be paid off quicker
-Easy access to equity in your property
-Line of credit could be used to fund investment property
-Offers cheaper form of finance than credit cards, personal loans or overdrafts.
Some Cons
-Interest rate is normally a bit higher
-Borrower needs to be good at budgeting. Line of credit can be very risky for someone who cannot stay within a budget and who lacks good financial control
-Principle may not get reduced if borrower only pays the interest on the outstanding balance
-A higher interest rate may not warrant having a Line of Credit Loan if the borrower is not able to get sufficient benefit out of this type of loan
-Very easy to spend the equity in your property on depreciating assets and luxury items
A line of credit is like having a credit card where you have a maximum spending limit, but the limit you get for a Line of Credit is usually so much higher than that of a credit card. In addition, the Line of Credit Home Loan interest rates are usually lower than that of a credit card. This is like having a credit card with a high spending limit at a lower interest rate which allows easy access to equity in the property. This can be a bit dangerous for those who cannot control their spending habits and all the equity in the home can be quickly used up. However, the flexibility of having money available anytime when needed has its obvious benefits.... and once the loan is set up, there is no time consuming application process to go through.
With a Line of Credit Home Loan, the only repayment that is required to be made is the interest on the outstanding loan balance. Therefore, cash flow can be maximised and monthly payments can be minimised by only meeting the minimum monthly payment requirement of paying the interest on the loan balance. In other words, the principal on the loan is not reduced, thereby minimising the loan repayment. If only minimum payments were made, the principal would never be reduced. Some lenders will impose restrictions after a certain period to ensure that the principal gets reduced after a certain time.
Usually, money is withdrawn by way of cheque book or via the automatic teller machine (ATM). The money can be used to pay for just about anything, including a deposit on another property, a home loan extension, share investment, school & university education, debt consolidation, or any unexpected expenses. Using the money in the line of credit can be a less expensive form of finance than making use of a personal loan or running the credit card. The line of credit can also be used for debt consolidation purposes, with the possibility of reducing interest payments.
The line of credit is secured by way of a mortgage over a property, which can be a residential or an investment property. The loan usually has no set term.
Some Pros
-May be beneficial to those on irregular incomes as repayments can be varied by the borrower as required
-Maximum cash flow
-Great flexibility
-Gives borrower more financial control
-No Time consuming application process when money is needed
-Can make savings on interest payable by using the Line of Credit Loan account as a savings account and loan may be paid off quicker
-Easy access to equity in your property
-Line of credit could be used to fund investment property
-Offers cheaper form of finance than credit cards, personal loans or overdrafts.
Some Cons
-Interest rate is normally a bit higher
-Borrower needs to be good at budgeting. Line of credit can be very risky for someone who cannot stay within a budget and who lacks good financial control
-Principle may not get reduced if borrower only pays the interest on the outstanding balance
-A higher interest rate may not warrant having a Line of Credit Loan if the borrower is not able to get sufficient benefit out of this type of loan
-Very easy to spend the equity in your property on depreciating assets and luxury items
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RESOURCES
I NEED A HOME LOAN
- Make an appointment
- Apply Now!
- Free mortgage check
-'Home loan symptoms'
- Loan pre-approval
- Home loan calculator
ARE YOU -
- A First time home buyer
- Need loan pre-approval
- Refinancing
- Buying your next home
- Investing in Property
- Using Equity in a home
- Self Employed
- Credit impaired
TYPES OF HOME LOANS
- Standard variable loans
- Basic variable loans
- Fixed interest loans
- Low Doc loans
- No Doc loans
- No deposit loans
- Credit impaired loans
- Investment loans
- Split rate loans
- Redraw
- Honeymoon loans
- Line of credit loans
- Debt consolidation loans
- Loan portability
- First home buyer loans
- All in one loans
- Line of credit loans
- Renovation loans
- Bridging loans
- Reverse mortgage loans
- Offset loans
- Construction loans
ABOUT US
- About us
- Why use us
- Privacy
- Terms of Use
CONTACT US
- Contact us
- Request an appointment
FAQ's
MY CREDIT RECORD
SITE MAP
WHERE WE OPERATE
- Sydney Upper North Shore
- Sydney Lower North Shore
- Sydney Northern Beaches
- Western Suburbs
- Sydney Hills District
- Eastern Suburbs
- Sydney Inner West
- Sydney CBD
RESOURCES
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Use of the information on this page and on this website is subject to the Terms of Use & Disclaimer which can be read by clicking here on Terms of Use and Disclaimer. Our Privacy Policy can be viewed by clicking here on Privacy Policy.
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