Have you considered a Line of Credit?

A Line of Credit (LOC) or Home Equity Loan allows borrowers to withdraw funds out of the equity in their property up to a set limit, usually 80% LVR, at any time. Used wisely it is an ideal way of getting what you have always wanted or to improve your portfolio.

The great thing about a Line of Credit is that you only pay interest on what you use. So if you draw a LOC of $100,000 but only use $20,000 for renovations or a purchase, the only interest you have to pay is on that amount, as the $80,000 has been untouched.

Rather than saving up another deposit for your next addition to your property portfolio it is common to use a LOC as a down payment instead. If your strategy involves increasing the value of your property then using your equity for renovations can be a profitable move if the resulting capital gains are greater than what was paid.

Practiced smartly a line of credit can be useful to purchase other assets or items. An example is that you have the advantage of financing a car at home loan rates. As the interest rate of a credit card is slightly higher than the standard variable you can effectively use it in the same manner but with a lower rate and higher limit.

If you are thinking of taking out a LOC it is important that you have the financial nouse to be adequately prepared. Since the only requirements are that the interest is paid when due and to stay within the credit limit it may be tempting to go on a spending spree. This is a dangerous game as frivolous use could mean the principle may never get paid down. So if you do not budget or cannot restrain your expenses your loan could keep extending to the point where it becomes difficult to make repayments.

When utilised effectively, a Line of Credit can achieve your various goals. Whether it is building your portfolio, renovations or a holiday a Line of Credit can be used for almost anything. However, failure to exploit its attributes could result in you ending up with a loan you can never pay off.

If a Line Of Credit sounds like something beneficial to you call us and we will happily be of service (08) 9289 7777.