A line of credit equity loan allows you to borrow money using the equity in your property.
Equity is the portion of your home that you own. It's calculated by taking the value of your home minus any money you still owe on it.
You can use a line of credit like a credit facility, accessing it as and when you need to and only paying back what you've drawn down.
What is a line of credit and how can I use it?
When you access money through a line of credit, you're withdrawing money from your home loan based on the amount of equity you have built up in the home. The equity in your home is the amount of property you own, which is based on the property value minus the amount of debt you have left.
You can take out a line of credit and spend it on anything you like, from home renovations, a holiday or car, to even funding another property purchase or investment.
Note: The property value is based on the current value, not the value when you bought it. So, if your property value has increased since you purchased it, you have even more equity to access!
How much of my equity can I borrow?
Most lenders will lend you up to 80% of your property's value. This means you can borrow the difference between the equity you currently have and 80%.
Some will go up to 90% or even 95%, but an 80% limit is far more common.
You can work out how much equity you could borrow using this formula:
(Property value x 80% LVR) - existing debt.
Example:
$700,000 x 80% = $560,000
$560,000 - remaining debt of $400,000 = $160,000
The amount you would access through your line of credit = $160,000
How can I use a line of credit loan to invest?
Investors can use their equity to buy an investment property. For example, if your property is worth $500,000 and your mortgage balance is $200,000, then you have $300,000 worth of equity. This is a substantial amount of money that can be used to fund the purchase of another property or invest in other assets, such as shares.
How much does a line of credit home loan cost?
Line of credit equity loans are not as popular as they used to be because of the high cost that can come with them, particularly when compared to other options you might have to access your equity.
Costs you need to be aware of are:
Interest charges. The lender charges interest, but remember this is only charged on the amount you spend, not on the total credit limit.
Upfront fees. Many lenders charge an application fee. A valuation fee is quite common too. You may also have to pay a discharge fee when the loan ends.
Ongoing fees. Some lenders charge a small monthly service fee instead of, or sometimes in addition to, the application fee.
Interest rate calculation
You only need to repay the amount you actually spend, not the total line of credit that the lender extends to you. But line of credits usually come with much higher interest rates than your home loan and some personal loans.
If you have a $200,000 line of credit and you spent $30,000 on a car, you would only pay interest on the $30,000, not the full $200,000.
Repayments
With many line of credit home loans, you don't have to make monthly or regular repayments. This gives you more flexibility. In many cases, you don't have to make repayments until you reach your credit limit.
Line of credit home loans are often interest only for the first few years, meaning you pay the interest charges now and repay the borrowed amount later.
This keeps your costs down, but if you continue doing this for a long time it could cost you a lot in interest.
Average rate for a line of credit
The average interest rate for a line of credit home loan is 7.20% in August 2025, according to the rates we have in Finder's rate database.
Source:Finder's rate database
The benefits and drawbacks of borrowing home equity
There are many benefits to withdrawing your equity if you need it, but any borrowing situation comes with risks that you need to know.
Benefits
Accessibility. Line of credit loans are easier to obtain than other types of loans and credit cards.
Flexibility. The funds can be withdrawn easily via cheque or an ATM card linked to the loan. Some lenders provide borrowers with the ability to withdraw funds through an online banking system or a telephone banking system.
Additional repayments. Extra repayments on the loan can be made at any time, which can help reduce the amount of interest paid over the life of the loan.
Low interest rates. One of the most attractive benefits of a line of credit loan is that it often has lower interest rates compared to other products such as personal loans or credit cards.
Drawbacks
Difficult to manage. As it's easy to access the money and most line of credit loans involve a large amount of money, the borrower needs to be financially disciplined to manage this type of loan.
Security. If the loan isn't repaid according to the terms of the contract, the lender can take the property as payment.
Equity loss. Your equity is wealth. It's yours to use as you see fit, but keep in mind that by using it, you're reducing – hopefully temporarily – the value you have in your house.
No end date. The flexibility of a line of credit can be a bad thing too. If you take a long time to repay what you've borrowed it could get expensive.
How to compare line of credit equity loans
Comparing home equity loans is a little different to comparing traditional mortgages. You need to look at:
Interest rate. The lower your rate the lower your repayments.
Fees. The fewer the fees, the better.
Borrowing amount. The amount you wish to borrow is an important consideration. Some lenders have fairly low maximum loan amounts, while others could lend you enormous sums of money (provided that you have the equity).
Expert insight: LOCs are best used for investments and business
"A Line of Credit (LOC) is like having a huge credit card facility, only paying interest on used funds. These facilities are generally only available for investment and business funds and not personal, so they do come with higher interest rates. With the introduction of offset accounts, the use of LOC's have reduced significantly as they work in the same way however cheaper."
Raj Ladher
Senior mortgage broker, Equilibria Finance
How do I apply for a line of credit equity loan?
If you're interested in applying for a line of credit equity loan, you should speak to your lender or mortgage broker.
While you can get a line of credit from your existing home loan lender, you may be better off refinancing to a new one. Get an idea of what your existing has to offer and then compare with the lenders in the above table.
Your mortgage broker could be able to help you with other ways to access your equity at a lower cost than line of credit loans would be.
When you're applying for a line of credit you may need to satisfy the following criteria or supply the following information:
Name and address for each borrower
Purchase date and price of your home
Employment income
Outstanding balance and monthly payment on current mortgage
Estimated market value of your home
Requested loan amount
Photo ID for all borrowers
Frequently asked questions about line of credit equity loans
You can save money on the interest payable over the life of your loan by using your income to offset the loan amount. This can be done by depositing your income into the loan account and then withdrawing money as needed to satisfy your living expenses from the line of credit. With this method, the interest on the loan is only calculated on the remaining balance of the account, which will lower your interest charges.
From a lender's point of view, it has the security of your home in the event you default on the loan. If your property declines in value, you will end up with less equity and you could even end up owing more on the loan than your home is actually worth. This is why it's a good idea not to borrow or use the full amount of equity available. Always leave a buffer.
Line of credit loans typically have much lower interest rates than personal loans. If you're disciplined in paying off your line of credit, you could potentially save thousands of dollars in interest. Let's look at an example.
Line of credit
Personal loan
Borrowing amount
$10,000
$10,000
Length
5 years
5 years
Rate
5%
14%
Monthly repayment
$188.71
$235
Over the course of the personal loan, you would pay $4,117 in interest. With a line of credit rate, you'd pay $1,322.74 in interest. That's a saving of more than $2,794 over 5 years.
However, this requires the discipline to repay your line of credit loan in a timely manner. If you ended up letting your line of credit loan stay open for 15 years, you would end up paying $4,234.29 in interest, eclipsing the amount you would have paid on a personal loan.
Sources
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Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University.
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Hi I am on a carer pension and my husband is on aged pension. We own our home outright, of low value due to situation approx $80-100k and have $40k+ savings.
We need some renovations a new bathroon toilet built on as the current one is not suitable etc not sure ob costs but say $40000.
Is a LOC the way to look for finance?
BelindaApril 20, 2016
Hi Rob,
Thanks for reaching out.
While I can’t provide personalised advice, if you need to fund a renovation project, then a line of credit home loan or a personal loan may be feasible.
You can compare a range of line of credit or home equity loans above on this page, and you can compare personal loans too.
Keep in mind that with a line of credit loan, you generally need to have the good financial discipline to ensure that you won’t access a large number of funds at one given time.
It’s advised that you speak to a broker to discuss your borrowing options and the type of finance that will suit your situation. A broker can review your borrowing power and they can draw upon a panel of lenders to find one that’s more likely to review your application (given that you are both receiving pension benefits).
All the best,
Belinda
JohnFebruary 11, 2015
I’m currently semi retired, working part time and together with my allocated pensions and annuities my annual income is approx $60,000. I own my home which has a market value of #850,000. All credit cards both bank and store are paid in full each month. We own two cars. We currently have a Line of credit with the NAB which has a ceiling of $30,000.The LOC debt outstanding is approx $7500. The interest rate is 5.36%. We have no other debts. I’m seeking to increase the LOC ceiling to $50,000 and improve on the 5.36% interest rate. What advice can you offer?
Finder
ShirleyFebruary 12, 2015Finder
Hi John,
Thanks for your question.
There are number of products on this page that is under the 5.36% p.a. mark. If you click on interest rate (p.a.) in the blue comparison table above, it will automatically sort the products into ascending order for you.
If you’d like to proceed with the new loan, you can speak to your new lender about what options you have paying out your current LOC.
I hope this helps,
Shirley
gregFebruary 1, 2015
I’m looking at a 120,000 line of credit, have no mortage, house value 1.2Mil. I will draw down small amounts Buy car , hol etc, extra money into super over a 2 year period. We plan to sell the house 2018 pay off the Line of credit. I know you pay for what you use (interest) how does the lender determine what the Monhtly re-payments will be ???
Finder
ShirleyFebruary 2, 2015Finder
Hi Greg,
Thanks for your question.
The monthly repayments are usually determined by the interest rate, applied to the outstanding balance. You can enter your borrowing amount into our blue table above, and it will generate the monthly repayments for you.
Cheers,
Shirley
sue-anneJanuary 20, 2015
my husband has a line of credit it is attached to an investment property, what happens if he dies, does it automatically come to me or does the line of credit become a mortgage?
Finder
ShirleyJanuary 21, 2015Finder
Hi Sue,
Thanks for your question.
We have a good article called What happens to my home loan if I die? that can provide more information on this topic. Generally, the debt is handed over to the person closest to the borrower. As the article explains, there are some measures that you can take.
I have about $280 000 equity in my home and I would like to apply for a line of credit. I have no other loans apart from my mortgage and I have few expenses (only storage and health insurance). I don’t own a care and I have no dependents. I applied for a loan of $5000 from the bank with which I have my mortgage but they refused. The reason is that I am currently unemployed at the moment, but I have signed a contract to start a well paying job in December this year.
My question is: Can I apply at another bank even if I don’t have a bank account with them? I don’t even have a credit card because I am financially conservative, but when I applied for one at a different bank to my mortgage bank, I was refused again, because I am currently unemployed. If I can’t manage to get an equity line of credit from a bank, what are other options for me to get $5000 in the next month or so? I would really appreciate your advice.
Finder
ShirleySeptember 29, 2014Finder
Hi Justine,
Thanks for your question.
Currently being unemployed is a huge roadblock for any type of credit application, because most lenders like to see that you’re earning an income to pay back the loan you take out. Even though you intend to tap into your equity, lenders like to see that there is a supplementary income to reduce the risk exposure to them.
If you’d still like a line of credit home loan, you may want to get in touch with a mortgage broker. They’re home loan experts who can help you find the right loan for your situation.
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Hi I am on a carer pension and my husband is on aged pension. We own our home outright, of low value due to situation approx $80-100k and have $40k+ savings.
We need some renovations a new bathroon toilet built on as the current one is not suitable etc not sure ob costs but say $40000.
Is a LOC the way to look for finance?
Hi Rob,
Thanks for reaching out.
While I can’t provide personalised advice, if you need to fund a renovation project, then a line of credit home loan or a personal loan may be feasible.
You can compare a range of line of credit or home equity loans above on this page, and you can compare personal loans too.
Keep in mind that with a line of credit loan, you generally need to have the good financial discipline to ensure that you won’t access a large number of funds at one given time.
It’s advised that you speak to a broker to discuss your borrowing options and the type of finance that will suit your situation. A broker can review your borrowing power and they can draw upon a panel of lenders to find one that’s more likely to review your application (given that you are both receiving pension benefits).
All the best,
Belinda
I’m currently semi retired, working part time and together with my allocated pensions and annuities my annual income is approx $60,000. I own my home which has a market value of #850,000. All credit cards both bank and store are paid in full each month. We own two cars. We currently have a Line of credit with the NAB which has a ceiling of $30,000.The LOC debt outstanding is approx $7500. The interest rate is 5.36%. We have no other debts. I’m seeking to increase the LOC ceiling to $50,000 and improve on the 5.36% interest rate. What advice can you offer?
Hi John,
Thanks for your question.
There are number of products on this page that is under the 5.36% p.a. mark. If you click on interest rate (p.a.) in the blue comparison table above, it will automatically sort the products into ascending order for you.
If you’d like to proceed with the new loan, you can speak to your new lender about what options you have paying out your current LOC.
I hope this helps,
Shirley
I’m looking at a 120,000 line of credit, have no mortage, house value 1.2Mil. I will draw down small amounts Buy car , hol etc, extra money into super over a 2 year period. We plan to sell the house 2018 pay off the Line of credit. I know you pay for what you use (interest) how does the lender determine what the Monhtly re-payments will be ???
Hi Greg,
Thanks for your question.
The monthly repayments are usually determined by the interest rate, applied to the outstanding balance. You can enter your borrowing amount into our blue table above, and it will generate the monthly repayments for you.
Cheers,
Shirley
my husband has a line of credit it is attached to an investment property, what happens if he dies, does it automatically come to me or does the line of credit become a mortgage?
Hi Sue,
Thanks for your question.
We have a good article called What happens to my home loan if I die? that can provide more information on this topic. Generally, the debt is handed over to the person closest to the borrower. As the article explains, there are some measures that you can take.
Hope this helps,
Shirley
Hi Sue-anne,
Thanks for the question.
We interviewed an expert from Slater & Gordon about this and wrote this guide – What happens to my home loan if I die?
I hope this helps,
Marc.
I have about $280 000 equity in my home and I would like to apply for a line of credit. I have no other loans apart from my mortgage and I have few expenses (only storage and health insurance). I don’t own a care and I have no dependents. I applied for a loan of $5000 from the bank with which I have my mortgage but they refused. The reason is that I am currently unemployed at the moment, but I have signed a contract to start a well paying job in December this year.
My question is: Can I apply at another bank even if I don’t have a bank account with them? I don’t even have a credit card because I am financially conservative, but when I applied for one at a different bank to my mortgage bank, I was refused again, because I am currently unemployed. If I can’t manage to get an equity line of credit from a bank, what are other options for me to get $5000 in the next month or so? I would really appreciate your advice.
Hi Justine,
Thanks for your question.
Currently being unemployed is a huge roadblock for any type of credit application, because most lenders like to see that you’re earning an income to pay back the loan you take out. Even though you intend to tap into your equity, lenders like to see that there is a supplementary income to reduce the risk exposure to them.
If you’d still like a line of credit home loan, you may want to get in touch with a mortgage broker. They’re home loan experts who can help you find the right loan for your situation.
Hope this helps,
Shirley