Chances are you may have heard of a revolving credit home loan, otherwise known as a revolving line of credit. But what exactly is it, what do you need to know before getting one, and how does it compare to your traditional home loans?
A revolving credit home loan is one of the most flexible home loans. It’s a bit like having a big overdraft - you are set a credit limit and you can withdraw and deposit money as you like, as long as you don’t exceed the stated limit.
Revolving credit home loans can be great for those who have irregular income, like self-employed or contractors. For those currently building or renovating a home, it can also be a good option, as you can draw down on money when you need it, rather than having to apply to top-up your loan.
Since there are no fixed repayment periods, it can make it easier to manage. You can also draw down on the money when you need it and as often as you need to. Many people choose to have their income go straight into this account, which also helps to reduce their interest.
While this all sounds wonderful, there are a few things to consider….
A revolving credit home loan is not for you if you struggle to save or manage money. This form of loan is really aimed at those who are good at budgeting and won’t be tempted to keep maxing out their available credit - you do still have to pay it back!
The interest rate is also a little higher than your standard rates, and it is a floating rate so can move up and down. This means interest can accrue quicker than if on a fixed rate.
If a revolving credit home loan is something you would like to know more about then get in touch with our mortgage advisors at Better Choice Home Loans. It is also possible to have part of your loan fixed and part as a revolving credit home loan, so this is something we can also discuss.
Get in touch with our Better Choice team today!