Are you wondering what type of mortgage is best for you? With its variable interest rates and financial flexibility, a revolving credit mortgage could be the answer.
Our friendly mortgage advisers are here to help you make the right loan choice for your financial goals. Better yet, our services are usually free.
A revolving credit mortgage is essentially combining your income, transactions, savings and loan into an all-in-one account. This account has a large overdraft facility, which is where your mortgage sits. After borrowing a pre-determined amount, you can redraw credit as many times as you need. This means you can spend and repay whenever you want, provided you do not borrow more than your limit.
Revolving credit mortgages have a variable interest rate which can increase or decrease depending on market rates. Interest is calculated daily, based on your account balance, so you can use your income to reduce the amount you owe, which will also reduce the interest charges. This method gives you the option to pay your mortgage off faster, while maintaining some financial freedom.
Due to its flexibility, a revolving credit mortgage is ideal for anyone with a fluctuating income. However, some self-discipline is required to pay off this loan, and is not appropriate for people who are not confident in their budgeting their finances.
Pros:
Ideal for workers with an irregular income
A revolving credit home loan is ideal for freelancers, contractors, seasonal workers and anyone else who has an uneven income. Revolving credit mortgages help to smooth out the highs and lows of your cashflow, and its flexibility allows you to make repayments on your schedule.
Variable interest rate
Revolving credit home loans feature a floating interest rate, with interest payments being calculated based on your account balance. By directing your income into the mortgage, the account balance is brought down, which will lower your interest repayments.
Flexibility
Revolving credit mortgages do not have set repayment schedules, and it is up to the borrower to make repayments when they want to. These loans also give you the ability to withdraw and repay as often as you want, so long as you do not borrow more than the predetermined limit.
Cons:
Requires self-discipline
Because all your income and expenses are joined together, seeing an account balance of a large negative number can be disconcerting. Understanding how much money you have to work with takes careful planning, and budgeting is essential.
Overspending can increase your interest rate quickly and until repayments are made, interest keeps being added onto the total outstanding account balance.
Variable interest rate
Utilising a variable interest rate can sometime be advantageous for your mortgage, but it depends on the market. Floating or variable interest rates fluctuate depending on the current market, meaning they can go up or down at any time. Additionally, in New Zealand floating interest rates are typically higher than fixed rates.
Are you wondering if a revolving credit loan is right for you? This type of loan is ideal for people with an irregular income or those who are confident budgeters.
Talk to one of our friendly mortgage advisers to see if a revolving credit mortgage is best for you.
A revolving credit mortgage is essentially combining your all your accounts (check, credit and savings) and loan into an all-in-one account. Any income is put towards lowering your loan, which also lowers the interest rate. The account can also be used for daily expenses, provided you do not borrow more than your limit.
Revolving credit can help you to pay off your mortgage faster and save you money in the long run if you can effectively manage your finances. It is especially helpful for those who have irregular income.
A revolving mortgage works as a normal account that has a large overdraft. The main feature of a revolving mortgage is the variable interest cost, which goes up or down depending on your account balance. The lower the balance, the lower the interest amount you’ll pay.