Home equity credit line

Home equity credit line

A flexible form of mortgage. You are granted a maximum loan frame,
but pays interest only on the part of the frame that you have used.

What is a home equity credit line ?

Home equity credit lines make it easier to have access to money when the need arises. This is the most flexible mortgage you can have.
The bank can offer a framework loan within 60% of your home’s value. You decide when and how much you want to pay into the loan. Most banks require you to pay the interest cost on the framework loan. Others have no claim on this. In practice, this does not matter, since you can still dispose freely within the loan limit. Here you cannot choose between fixed interest rates. The reason why you cannot have a fixed interest rate on the home loan is that you must be able to deposit money and withdraw money as you wish.

Example

You have a home with a value of 6,000,000. You can then get a maximum of 3,600,000 in housing credit (60% of the value).
From before, you have a regular mortgage of 3,000,000. Home equity credit line is then used to refinance the loan of 3,000,000, but you then also have 600,000 in a loan account for future needs. You do not pay interest on this 600,000 until you have moved some of this money to a checking account. Then you also pay interest on the sum you transfer.

FAQ – this is what many people wonder about home equity credit lines

Who can get a home equity credit line?

The bank can give you a framework loan when the loan-to-value ratio is below 60%. This means that the loan is a maximum of 60% of the market value of your home. The bank will also assess this from customer to customer as not everyone should perhaps have such great flexibility with their loan, but rather should have regular repayments.

Home equity credit line vs framework loan or flexible loan

Dear child, many names. This also applies here. The products are similar, but the banks have different designations for the product. There will also be a difference from bank to bank in how flexible the loan is. Talk to us and we will find the right bank for you.

What is the difference between a home equity credit line and a mortgage?

With a regular mortgage, you don’t have any extra money left in an account for future needs. If you don’t really need extra money, but only want to pay interest, a regular mortgage with interest-free repayments will be a cheaper alternative.

How long can you have a home equity credit line?

The most common is that the banks grant this loan for up to 10 years, but with the possibility of extension. They do this to be able to check that the customer can tolerate having this flexibility without increasing consumption to a greater extent.

What is the interest rate on home equity credit line ?

The interest rate on is usually slightly higher than on a normal mortgage. There is no point in having a home equity credit line if you don’t have a few hundred thousand extra in a flexible framework. Then an interest-free mortgage would be a better alternative.

What are the disadvantages of a home equity credit line ?

Your consumption can quickly increase more than it should because you have so much flexibility. Some do not pay down the loan and let the interest cost “eat” the free frame. This type of loan requires greater financial discipline.

Loan account and savings account in one

This also works as a savings account in that the borrower can use the available limit to deposit money. Example: You have a limit of 1 million, but have only used 700,000 of this limit. Then you pay interest for a loan of 700,000. If you insert e.g. holiday pay of 50,000, you will reduce your debt to 650,000 and interest will be charged on this amount. You can transfer the money back to your current account at any time.

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