Revolving Credit Mortgages Explained

These types of facilities provided in this type of mortgage is best described as a large overdraft within the mortgage account. In most circumstances the interest is charged to that part of the account on a monthly basis at the same rate as the overall mortgage.

  • As the interest is calculated monthly on the amount borrowed or used, if the client keeps the balance as low as possible, this saves on the amount of interest paid. 

  • Client often use this to have their salary paid directly into these type of accounts to keep the balance low and therefore save on interest.

  • With some lenders it can be structured so it is an “Amortising Revolving Credit Facility”. This means that the “overdraft” facility slowly reduces each month to help the client reduce the debt over a period of time.

  • As the mortgage is effectively charged at the variable interest rate, there is no limitations or penalties for lump sum payments.

  • During the term of the mortgage, the client is able to withdraw to the agreed amount without any need for a further application.

 

This is often used by clients so the facility maybe used without having to apply for a separate personal loan when it’s required.

  • The interest is charged normally at the current market rate so it will have fluctuations.

  • This type of mortgage is normally targeted at self-employed individuals and investors.