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A Revolving Credit mortgage if used properly, can be a powerful tool. You can pay your mortgage off a lot quicker than you can under a standard “term” mortgage.

What is Revolving Credit?

A Revolving Credit facility is basically a large overdraft secured by way of a mortgage over your property. It can be taken for up to 30 years and only requires you to pay the interest each month.

The “Pros”

• The facility is floating (also a potential “con”) but this does mean that you can make lump sum payments at any time without penalty.
• As soon as you make a deposit you are only paying interest on the outstanding balance.
• The facility is perfect for those people who have income which fluctuates as they can deposit funds as soon as they get them and draw on them as they require.
• The facility provides a limit which can be redrawn to the maximum without having to go back to the Bank to apply for an increase.
• The facility takes over from your normal cheque account and you can run everything through it without changing automatic payments or direct debits.
• It can have a cheque book and debit card attached to it for access just as a normal cheque account.

The “Cons”

• The facility is a floating one which means that as rates rise, so do your interest costs.
• Being a facility which does not necessarily need to be repaid for up to 30 years means that people need to be disciplined to reduce the outstanding balance. Having an extra $10,000 (after paying this amount off) can be tempting, easily accessed and used at any time.

If you have a revolving credit mortgage or are thinking about one, read Revolving Credit – Using the Power or talk to us to find out how to get the most out of this arrangement.