Find and compare line of credit home loans

Sort By

Oops, no result found.

Include all products

Learn more about home loans

There are many types of loans specifically designed to suit the lifestyle and financial needs of different people at various stages in their lives.

And for those borrowers who have already built up some equity in their home but require a degree of financial flexibility, a line of credit (LOC) loan may be an effective solution to helping them meet their needs.

So how does a line of credit loan work?

Essentially, these loans function similarly to a credit card, where you are allowed to borrow up to a certain amount of money within a fixed period of time set by the lender, but there are significant points of differentiation from other loans, based on how borrowers can manage the process of their withdrawals and repayments.

The key features of the line of credit loan are:

  • During the life of the loan you can withdraw money as you need it and you do not need to notify the lender what the funds are being used for each time you withdraw.
  • As you pay back the principal amount, your creditamount continues to revolve and you can use those line of funds again as you need to withdraw money.  
  • You only make repayments based on how much you borrow, against your maximum, pre-approved amount. This is where the line of credit is similar to repaying debt on a credit card.
  • You can pay back any amount as long as you make the minimum monthly payments set by the lender. Minimum payments may be a combination of interest and principal, or interest only.
  • As the loan structure is not viewed as traditional in nature, the interest rate is usually set above the standard variable rate by banks and financial institutions.

How does a line of credit loan differ to a personal loan?

The line of credit loan is different to a personal loan, where you get a lump sum and you agree a fixed or variable interest rate and have a fixed term for repayment.

As a line of credit loan is secured against your home equity, unlike a personal loan which is often unsecured, the interest rate on a line of credit loan is usually lower than on a personal loan.

How does a line of credit loan differ from a credit card?

As with a personal loan, the interest rate on the line of credit loan is also generally lower than that on a credit card, which is why some borrowers choose to opt for this loan, rather than simply increasing their existing credit card limit or taking on a credit card.

What would you use line of credit loan for? 

In many cases, line of credit loans are used by people whose borrowing needs vary and who therefore want some flexibility around withdrawals and repayments.

These types of loans are often used for:

  • Home renovations and repairs
  • Buying another property
  • Taking a holiday
  • Buying a car

For example, you may have equity in your home and are considering whether you do a major renovation or make a series of repairs and minor alterations.

You don't necessarily know how much money you will need, so opening a line of credit can give you the flexibility to pursue your project knowing you can draw down sufficient money to complete it.

Being smart about your line of credit loan

Financial discipline and organisation will help you manage your debt on a line of credit loan. There are several simple ways you can utilise its features to your full advantage:

  • One common way of reducing the cost of the loan is to have your income deposited into your line of credit loan account to offset the overall loan amount. That way the interest on the loan is only calculated on the remaining balance of the account, which will lower your overall interest charges.
  • Likewise, any planned or unexpected income that you receive, such as a tax refund, can also be deposited into the account as an additional repayment which contributes to reducing the interest payable.
  • Another possible way to manage the loan effectively may be to set repayment amounts above the specified amount as part of your regular fortnightly or monthly budgets. This limits the tendency to use more of the funds without thinking of the financial ramifications.
  • Always remain conscious of the original estimated value of your home that the approved loan amount was based upon. If property values in your area or those within the property market in general are not increasing, be prudent in your use of the line of credit loan so your home equity still remains a comfortable proportion of the total value of your home, against the size of the outstanding loan amount.

What should I be aware of with these loans?

As with every loan, it’s worth evaluating not only the benefits of the loan but also the potential risks, such as the high interest rate attached to these loans compared to other more traditional loans.

Some tips to consider:

  • Remember that this loan is most suited to those who are financially disciplined and remain committed to making regular repayments and gradually reducing the loan.
  • This may not be an appropriate solution for those borrowers who see the loan as a quick fix to a funding shortfall. Those borrowers may find they are still overstretched financially and then have continual problems with their repayment schedule.
  • You need a good credit rating to apply for these loans, so before you submit any applications, check your rating and determine whether you can do anything to improve it. The better it is, the greater the likelihood you'll have of being offered a lower interest rate.
  • As with a standard variable loan, the interest rate on a line of credit loan is vulnerable to the overall market movements of the interest rate environment. Ensure you have a realistic financial buffer in place with the loan to cushion the impact of any series of interest rate rises.
  • Some lenders may also charge monthly or annual fees as well as application fees, valuation fees and discharge fees, so you need to factor all costs into your financial calculations when comparing line of credit loans from a range of different lenders.
  • As with more traditional loans, if a line of credit loan isn't repaid according to the terms of the contract, the lender may be able to seize your property in order to recoup the debt.

Line of credit loans are offered by most banks, credit unions and financial institutions and can be a valuable way of supporting you to manage your finances throughout stages of your life where you require some flexibility as you continue to work towards your goals.

However, with an increasing number of loans to choose from, comprehensive research remains the key to determining which loan will be most appropriate for you and your particular circumstances.

Frequently asked questions

What is a line of credit?

A line of credit, also known as a home equity loan, is a type of mortgage that allows you to borrow money using the equity in your property.

Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.

This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.

How does a line of credit work?

A line of credit functions in a similar way to a credit card. You have a pre-approved borrowing limit and can draw on as little or as much of that sum as you need it, with interest paid on the outstanding balance.

Popular products include Commonwealth Bank Viridian Line of Credit, ANZ Equity Manager, Westpac Equity Access and NAB Flexiplus.

What is a bad credit home loan?

A bad credit home loan is a mortgage for people with a low credit score. Lenders regard bad credit borrowers as riskier than ‘vanilla’ borrowers, so they tend to charge higher interest rates for bad credit home loans.

If you want a bad credit home loan, you’re more likely to get approved by a small non-bank lender than by a big four bank or another mainstream lender.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Savings over

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

How does Real Time Ratings work?

Real Time RatingsTM looks at your individual home loan requirements and uses this information to rank every applicable home loan in our database out of five.

This score is based on two main factors – cost and flexibility.

Cost is calculated by looking at the interest rates and fees over the first five years of the loan.

Flexibility is based on whether a loan offers features such as an offset account, redraw facility and extra repayments.

Real Time RatingsTM also includes the following assumptions:

  • Costs are calculated on the current variable rate however they could change in the future.
  • Loans are assumed to be principal and interest
  • Fixed-rate loans with terms greater than five years are still assessed on a five-year basis, so 10-year fixed loans are assessed as being only five years’ long.
  • Break costs are not included.

What fees are there when buying a house?

Buying a home comes with ‘hidden fees’ that should be factored in when considering how much the total cost of your new home will be. These can include stamp duty, title registration costs, building inspection fees, loan establishment fee, lenders mortgage insurance (LMI), legal fees and bank valuation costs.

Tip: you can calculate your stamp duty costs as well as LMI in Rate City mortgage repayments calculator

Some of these fees can be taken out of the mix, such as LMI, if you have a big enough deposit or by asking your lender to waive establishment fees for your loan. Even so, fees can run into the thousands of dollars on top of the purchase price.

Keep this in mind when deciding if you are ready to make the move in to the property market.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

How can I avoid mortgage insurance?

Lenders mortgage insurance (LMI) can be avoided by having a substantial deposit saved up before you apply for a loan, usually around 20 per cent or more (or a LVR of 80 per cent or less). This amount needs to be considered genuine savings by your lender so it has to have been in your account for three months rather than a lump sum that has just been deposited.

Some lenders may even require a six months saving history so the best way to ensure you don’t end up paying LMI is to plan ahead for your home loan and save regularly.

Tip: You can use RateCity mortgage repayment calculator to calculate your LMI based on your borrowing profile

What is upfront fee?

An ‘upfront’ or ‘application’ fee is a one-off expense you are charged by your bank when you take out a loan. The average start-up fee is around $600 however there are over 1,000 loans on the market with none at all. If the loan you want does include an application fee, try and negotiate to have it waived. You’ll be surprised what your bank agrees to when they want your business.

What is a cooling-off period?

Once a home loan’s contracts are exchanged between the borrower and the lender, a five-day cooling-off period follows, during which the contracts may be cancelled if needed.