• “Found your dream home,  
    let McPhee Mortgage broking find the Right loan”
  • “Found your dream home,  
    let McPhee Mortgage broking find the Right loan”
  • “Found your dream home,  
    let McPhee Mortgage broking find the Right loan”
  • “Found your dream home,  
    let McPhee Mortgage broking find the Right loan”
  • “Found your dream home,  
    let McPhee Mortgage broking find the Right loan”

Line of Credit

A line of credit acts like a business overdraft. Income is deposited directly into the loan (such as salary payments, rental income, interest and dividend income). This reduces the loan balance and interest is charged on the outstanding amount only.  

If you require these funds you can simply withdraw them, however withdrawing funds will increase the amount outstanding and therefore the interest charged.

Lines of credit have benefits such as: 

Flexibility: You can pay off or withdraw as much as you like and will pay no redraw fees. You may even be able to link an ATM card to your account.

Savings Potential: By leaving funds in the line of credit for as long as possible, you will be charged less interest, and this has the potential to compound into years of savings on your loan.

Savings Alternative: Rather than having a separate savings account, you can simply pay more into the line of credit. This will ‘save’ you interest at a higher rate than ‘earning’ the same amount in a savings account. You won’t have to pay tax on this amount either.

A Line of Credit carries the following risks:

Reduction of equity: By redrawing funds from your line of credit you will reduce the equity in your home.

Spiraling Interest: Without discipline, a line of credit can work against you. If you redraw and spend all funds up to the limit, you will face higher interest bills and reduce the equity in your home.