What is A Line Of Credit Home Loan?

A line-of-credit home loan is a flexible loan that allows you to borrow money up to a certain limit and repay it over time. It works like a credit card, giving you access to funds when needed and charging interest only on the amount you use.

It can be secured or unsecured. A secured line of credit is backed by collateral, such as property, whereas an unsecured line of credit does not need collateral.

A line-of-credit home loan is a secured line of credit. This allows you to access the equity you’ve built in your home as a revolving credit facility.

What Is A Line-Of-Credit Home Loan?

A line of credit home loan is a revolving credit facility secured against your home. You’re approved for a credit limit based on your equity, can draw funds anytime, repay them, and borrow again, similar to a credit card but with lower interest rates and your property as collateral.

In simple terms, you can think of line of credit as a reusable pool of money tied to your home’s equity. You only pay interest on what you actually use.

How Does A Line Of Credit Work?

A lender sets a credit limit based on your home equity. You can withdraw funds during the draw period, repay them, and redraw repeatedly. Interest applies only to the outstanding balance. After the draw period, repayments usually shift to principal plus interest.

Line Of Credit Process

• Your lender calculates usable equity (usually capped at 80% LVR).

• You receive a pre-approved borrowing limit.

• You access funds anytime without reapplying.

• Interest applies only to what you’ve used.

• Repayments restore your available credit.

• The full balance must be repaid by the loan’s expiry.

Example Of Line Of Credit In Action:

• Property value: $600,000

• Mortgage balance: $350,000

• Available equity: $250,000

• Max borrowing at 80% LVR: $200,000

• Amount used: $50,000

• Interest charged only on: $50,000

• Remaining available credit: $150,000

Who Is A Line Of Credit Best Suited For?

A line of credit works best for borrowers who can actively manage repayments and avoid carrying high balances long term.

Here are some common use cases:

• Self-employed or commission-based earners managing uneven cash flow

• Homeowners funding renovations in stages

• Property investors covering short-term expenses

• Borrowers who can regularly reduce the balance

Who Can Qualify For A Line-Of-Credit Home Loan?

If you meet the following requirements, you can qualify for a line-of-credit home loan:

• You have enough equity in your property to get a line of credit. Most lenders require a Loan-To-Value Ratio (LVR) of 80% or less.
• You’ll need to demonstrate steady income and employment, as lenders will verify that you can afford to repay the line of credit.
• You can repay the line of credit before the end of the mortgage term.

What Are The Types Of Lines Of Credit?

There are mainly four types of lines of credit in Australia. They are:

• Home Equity Line Of Credit (HELOC): A revolving credit line secured against your home equity, offering lower rates than personal credit. The funds can be used for renovations, investments or major expenses.
• Personal Line Of Credit: An unsecured or secured credit facility for personal expenses like education, travel or emergencies. Interest rates are higher than on HELOCs, due to their unsecured nature.
• Business Line Of Credit: This type of credit provides businesses with flexible funding for cashflow, inventory or expansion. It can be secured or unsecured and offers ongoing access to capital without a fixed loan term.
• Overdraft Line Of Credit: This is attached to a bank account and allows withdrawals beyond the balance up to a set limit. It is often used for short-term cash shortages or unexpected expenses.

What Are The Pros And Cons Of A Line Of Credit?

Pros

• Pay interest only on funds used

• Ongoing access without reapplying

• Lower rates than credit cards

• Ideal for renovations or investments

• Flexible repayments

Cons

• Your home is used as collateral

• Variable interest rates

• Higher rates than standard home loans

• Banks can freeze limits during downturns

• Easy to overspend without discipline

How Much Can You Borrow With a Line of Credit?

Most lenders cap borrowing at 80% loan-to-value ratio (LVR), including existing loans. The basic formula is (Property Value × 80%) − Existing Mortgage = Maximum Credit Limit.

Some lenders also apply absolute dollar caps, tighter limits on investment properties, and higher income verification standards.

Who Can Qualify for a line of credit Home Loan?

Eligibility depends on equity, income stability, and repayment capacity.

Typical lender requirements include:

• LVR of 80% or lower

• Stable, verifiable income

• Strong credit history

• Ability to repay before loan expiry

What Types of Lines of Credit Are Available?

What Happens If Interest Rates Rise or the Bank Freezes the Limit?

• If rates rise: Prioritise repayments to reduce exposure.
• If your limit is frozen: You can still repay but may lose redraw access.
• If income drops: Convert part of the balance to a standard loan for stability.

Line Of Credit Vs Offset Account Vs Redraw: What’s The Difference?

Are You Looking For A Line Of Credit Loan?

A line of credit loan gives you flexible access to funds when you need them, while charging interest only on the amount you use.

You can use it to manage cash flow, cover ongoing expenses, fund renovation or even handle unexpected costs. In addition, it also allows you to repay and redraw funds repeatedly, which makes it more adaptable than a standard loan.

With lower interest rates than credit cards and greater control over repayments, a line of credit can suit you if you value financial efficiency.

If you’re looking for a line of credit loan, contact us today at 1300 889 743 or fill out our free assessment form to see if you qualify.