Revolving Line of Credit Loan
The best place to start your home loan search
What is a Line of Credit?A Line of Credit allows you to use the equity you have built up in your home as collateral for further credit and is characterised by flexibility and ease of use. It operates similar to a credit card and is the equivalent of an overdraft facility.
Property prices all over Australia have surged by more than 50% in recent years giving existing home-owners substantial equity to use for securing a loan - Equity is the difference between what you owe on your home loan and what the property is actually worth (according to the bank!).
The amount of Credit that is available to you depends on the amount of equity you have in your home and your ability to make repayments. Typically you can borrow up to 80% of your home value (or 90% with Lenders Mortgage Insurance) provided you have the financial resources to service the debt.
Line of Credit loans are commonly used to finance a deposit on an investment property, to renovate and increase the value of the existing home, or to purchase expensive items like a car or boat.
Line of Credit funds which are used to invest in assets that appreciate in value can increase your wealth, but inversely can result in greater debt when applied to items that depreciate or have no residual value like cars, boats, spa's, holidays etc.
Line of Credit Loan
Features of Line of Credit LoansThe Line of Credit is essentially a second loan (or overdraft facility) that is secured against your home, so you will get 2 loan statements each month. It is also possible to break the Line of Credit into sub-accounts. This enables you to keep accurate records for taxation purposes.
With the Line of Credit type of loan, it is possible to only pay interest on the part of the loan you have drawn down on unlike a conventional loan where you pay interest and principal on a lump sum. However if you wish to reduce the loan you obviously need to make principal repayments as well. The interest rate is usually similar to a standard Variable Rate loan.
The Line of Credit is not suitable for borrowers who don't have good financial management skills. If you can't control and repay more than the required monthly payment on your Credit Card then this type of loan is NOT for you! Too many Australians end up bankrupt, and for this reason lenders are tightening up eligibility criteria.
Some of the features that give a typical Line of Credit Equity Loan its flexibility include -
Benefits of a Line of Credit
Tips and strategies
Example Rates and FeesVariable Rate Home Loan NO FEES (June 2016):
*Based on $250,000 Loan over 25 years.
You can apply over the Internet and ask a for a free no-obligation quote on a Line of Credit.
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Thank you for visiting our Line of Credit web-page. We hope the overview has proved useful.
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