Credit line mortgage

How does a credit line mortgage work?

A credit line mortgage works like a revolving credit secured by your home. You get a credit limit from which you draw money as you need it and repay it again. Because your home serves as security, the interest sits lower than on an ordinary revolving credit, but higher than on a regular mortgage. And you only pay interest on what you have actually drawn, not on the whole credit limit.

Interest and tax

The interest is usually variable and differs from provider to provider. And there is one point you should not overlook: a credit line mortgage falls under box 3 and does not count as a home-acquisition debt. As a result you have no right to mortgage interest relief. Factor that in the moment you line up the costs against other types.

Pros and cons

Pros

• Flexible: draw and repay whenever it suits you.
• A variable rate lower than on an ordinary revolving credit.
• No mandatory repayment during the term.
• You only pay interest on the amount drawn.

Cons

• Your home serves as security.
• No mortgage interest relief (box 3).
• Few providers and often a maximum of around 80% of the property value.
• Usually only possible if you have enough equity.