Line of Credit / Equity Home Loan
Line of Credit (LOC), also known as Equity Loans or Revolving Credit, works more like a credit card and provides increased flexibility. The lender assigns you a credit limit secured against your property, and when you need cash you draw against that limit, usually by writing a cheque or using a special debit card. As you pay back the loan (the terms of repayment vary), the money becomes available to you again. Line of Credit loans usually attract a slightly higher rate of interest than a loan where the balance is continuously reducing.
More Information or Help
If you would like to talk to us confidentially about Line of Credit - Equity loans or other home loan options, fill out the form below or call 13 LOAN (13 5626) and we will return your call within 2 business hours.
This is a completely obligation free process and we charge no fees for giving general advice in relation to residential home loans.
Advantages and Disadvantages of Line of Credit / Equity Loans
| Pros |
Cons |
| You always have ready access to money, which makes this type of loan attractive to investors |
The variable interest rate applies, leaving you open to the risk of interest rate increases. |
| You can make repayments as you see fit - interest only, regular principal reductions on top of the interest payments, larger lump-sum reductions etc. |
If the LOC is being used for your principal residence, it requires discipline to ensure that over time the principle/balance of the loans is reduced. |
| As long as the balance doesn't exceed the approved limit, you are free to draw from and manage your LOC funds however you want. |
If there is equity within the facility, the temptation might exist to draw funds out for personal purposes in the hope that they will be repaid down the track. Apart from the obvious risks with this kind of decision, it may also create significant confusion when it comes time to do your tax return. |
Using your Line of Credit / Equity Loan
Line of Credit or Equity loans can be used for pretty much anything. You can use the funds on other properties, loans to children to help them buy property, for investment and businesses purposes, etc. As with any loan, it is advisable to talk to your local mortgage broker to determine if it is in fact the best option for you.
More information or help
For confidential assistance with your home loan or to talk to your local mortgage broker, call us at any time on 13LOAN or call our direct line on +61 2 9018 8417.
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