You can pay into and withdraw from your home loan every month, so long as you keep up the regular required repayments. Many people choose to have their salary paid into their line of credit account. This type of loan is great for people who want to maximise their income to pay off their mortgage quickly and/or who want maximum flexibility in their access to funds. This type of facility can also use funds already paid off on your home loan to invest in shares or place a deposit for an investment property, without having to go back to the bank for a new loan.
Repayment Options
A Line of Credit is an ongoing interest only facility with the loan not required to be repaid until the full loan term expires. For example if your line of credit facility has a 25 year term then you are not expected to repay this until the end of the 25 years. As long as you make your monthly interest repayments then there is no problem in having to clear your debt in full or have the bank call up the loan. If you have your salary paid into this account on a minimum monthly basis, this can act as the interest only repayment. Remember, you only pay interest on what you use.
Other Features
Redraw
With this type of loan you can redraw as many times you like without paying fees. That is why this type of facility is best for a share investor or one who needs access to a quick deposit on a investment property purchase. You can make unlimited deposits and withdrawals.
All in one account
You can use this as an all in one transaction/loan account allowing your regular salary act as the repayment for your loan.
Only pay for what you use
Unfortunately there are no fixed interest rates that apply, however a variable rate will allow you to only pay the interest on what you use.
What you need to know
Benefits
- You can use your income to help reduce interest charges and pay off your mortgage quicker.
- Provides great flexibility for you to access available funds.
- You can consolidate spending and debt management in a single account.
- Can allow you take advantage of investment opportunities immediately.
- You can combine this type of loan within a split facility arrangement.
You should be aware of
- Without proper monitoring and discipline, you won’t pay off the principal and will continue to carry or increase your level of debt.
- Line of credit loans usually carry slightly higher interest rates.
- Purchasing non investment items could mean paying a higher debt over many years.
