Revolving home loan

Our revolving home loan works like a big overdraft. You get approved to borrow up to a certain amount, and this is your credit limit. You can then spend money up to that amount.

You can order a Visa Debit or an Eftpos card for this account and spend money directly from here if you like. Or, transfer money into your normal everyday account when you're ready to make a purchase.

Unlike term loans, there are no set repayments on a revolving loan. You don't pay it down as such, you only pay interest on what you've used. The interest rate is variable, so it can change at any time.

For example, if you've got a revolving loan of $100,000 for renovations and you spend $20,000, you'll pay interest on $20,000. Then, if you spend another $30,000, you'll pay interest on $50,000.

Interest is calculated daily and charged monthly.

To reduce the amount of interest you pay, you can have your income credited directly into this account. Each day, as you receive income, pay bills and buy other things, the balance of your revolving credit will adjust. The more money in your revolving credit account, the less interest you pay.

If you already use a credit card, you could put all your spending on it with a direct debit from your revolving credit account to pay off your credit card each month, to keep as much in your revolving account as possible.

Generally, you'll require 20% equity to get a revolving loan. Done well, you should save money in interest over the years. But if it's not, the loan balance won't get paid off.

This kind of set up won’t suit everybody. Only opt for this loan if you’re confident in your budgeting skills and know you won't be tempted to max out your credit limit on unnecessary spending.

You can put some of your mortgage on a revolving loan and have the rest on other loan types, such as a fixed rate home loan, variable rate home loan and offset home loan. These loans then make up your home loan as a whole.

Learn more about mixing loan types and structuring your home loan.