A line of credit mortgage is the type of loan that will allow you to use the loan as your cheque account and allow you to draw down and repay the loan as you choose, it is similar to a credit card in the sense that it allows you to withdraw funds at anytime up to a set limit.
The choice to make repayments on either a monthly basis or with some loans is completely in your hands, you don’t have to make a payment as long as you remain below the limit.
It can be used to purchase most types of properties, whether it is an investment property or a family home. You can use the line of credit to carry out renovations, pay your bills or invest in shares.
Do I still Need a Bank Account?
If you have a line of credit then you don’t usually need a bank account as all of your income and expenses can be run through your home loan.
This is why line of credit loans are also known as “all in one” account or known as “all in one” home loans. But be aware there are some dangers in using a line of credit in this way
Which Lender can Offer Line of Credit Loans?
From lender to lender the interest rates and fees that can be offered for a basic home loan will vary, however all the major banks offer similar features for their line of credit loan.
Some common basic loan products are:
- CBA– MAV package line of credit residential equity / Line of credit residential equity
- Rams- Line of credit / Line of credit professional pack
- Westpac- Premier advantage equity access loan / Equity access loan
- St George- Advantage home loan package portfolio loan variable rate / Portfolio loan variable rate
- Suncorp- Money manager asset line / Asset line
- ANZ– ANZ portfolio loan equity manager / ANZ portfolio home loan / Breakfree equity manager / Equity manager / Breakfree equity manager / Professional benefits equity manager
- NAB– NAB home equity line of credit
- And many more
What are the Benefits from a Line of Credit?
If you’re cautions with your money and want the flexibility a line of credit can offer, then this is the loan for you, aside of that, this loan give the borrowers a chance to experience a sense of freedom and choice with their mortgage.
There are key benefits you should consider when it comes to getting finance under this type of finance:
- You can withdraw up to your credit limit without having to seek approval from your lender.
- The credit limit amounts are usually quite large which mean you can make larger purchases without going over the limit.
- The interest rates are generally lower than that offered through a credit card, often at home loan rates or just a little higher.
- You will have easy access to your funds as most line of credit facilities offer cheque books, internet and phone banking, and a range of other useful transactions.
- You can consolidate your debts by transferring other debts such as a personal or car loans into your mortgage.
- You can reduce the balance and consequently save on interest by directing all of your income into your home loan account.
Is a Line of Credit Suited for Me?
Generally, borrowers who are unable to afford to make significant additional repayments would end up worse off if they were to refinance to a line of credit, this is only because a line of credit usually offers a higher interest rate which would outweigh any savings that are made by combining your accounts.
A mortgage through a line of credit would usually be a interest only loan without a set term for the loans to be repaid, the borrower then has the choice on deciding when they will make payments on the principal, this will suit some borrowers and be a disaster for others.
A line of credit is best suited for people whose income fluctuates and they would be able to make additional payments, borrowers who have a flexible income and are able to afford to pay an interested rate high than the standard variable rates will be benefited.
What are the Risk Involved with a Line of Credit?
Even though a line of credit gives borrows a extensive amount of freedom, they are not suited for everyone.
Identical to any credit card account a line of credit loan would require good budgeting skills and financial discipline so then you will stay within your financial limits.
If you’re the type of person who is finding it hard to manage your money, then a line of credit loan may not be the best option.
Please enquire online or call us on 1300 856 846 if you would like to talk with our mortgage broker who can give you expert advice on line of credit.