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Line Of Credit

A Line of credit is a home loan that is more like a credit facility. With this type of home loan you have a credit limit, and if you owe nothing, you pay nothing that month. If you owe $10,000, your repayment that month will be the interest charge on $10,000.

Lets look at a couple of example to see how a line of credit works. Lets assume the credit limit is $100,000. If you owe $10,000 your will pay monthly repayments will be interest charges on $10,000 and you will have $90,000 of available credit. If you have spent some more money, on a car for example, and now owe $40,000 on your line of credit, your monthly repayment will be the interest charge on $40,000, and have $60,000 available credit. A really handy facility.

A real advantage to a line of credit is that you can have a balance of $0, and the limit remains for the life of the home loan. Alot of investors, share traders like this facility, as its handy to have that available credit should they want to invest. A line of credit is a great tool for people who like to have a cheap credit facility available should they choose to use it.

A line of credit generally has a variable interest, although a few banks or lenders offer a fixed rate line of credit. The interest rate on a line of credit is generally a little higher than a standard variable rate home loan, but generally only 0.2% to 0.5% higher.


Advantages

  • Can have a zero balance and the facility remains open.
  • Great for investors, share traders and people who like to have credit available should they need it.
  • Much cheaper than a credit card.
  • You may be able to package your line of credit under a banks or lenders professional package, saving on application and monthly fees, plus you may get an interest rate discount.
  • You may be able to direct credit your salary directly into your line of credit, which saves you interest.


Disadvantages

  • The interest rate can go up on a variable line of credit
  • The interest rate is generally a little higher than a standard variable loan
  • Because the funds are so easily accessible, it is easy to spend large amounts of money and reach your credit limit.


General Line Of Credit Home Loan Fees

  • There may be an application fee on a line of credit.
  • There may be a monthly or annual fee on a line of credit.
  • If your loan is greater than 80% of the property value, you will pay a once off mortgage insurance fee.


Loan Term And Repayment Types

  • Home loan terms from 5 to 30 years (Depending on the bank or lenders credit policy)
  • Minimum repayments on a line of credit are generally interest payments. The great advantage is, you can pay as much as you want, and have those extra funds available, if you need them.


If you would like some more information on line of credit home loans, contact Perth Mortgage Broker Group , or call Troy on 0411 229 602, 7 days a week.

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