What is a line of credit home loan?

A line of credit home loan lets you withdraw money from your equity to spend on renovations, investments or even a holiday. But what are the risks?

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By

Richard Whitten

Edited by

Joelle Grubb

Updated

Fact checked
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Key takeaways

  • 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.
  • Lower rates than unsecured credit. Because a line of credit is secured against your home, its rate can be lower than unsecured products such as credit cards, although it is usually higher than a standard home loan rate.

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).
Raj Ladher's headshot
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's headshot
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

To make sure you get accurate and helpful information, this guide has been edited by Joelle Grubb as part of our fact-checking process.
Richard Whitten's headshot
Senior Money Editor
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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. See full bio

Richard's expertise
Richard has written 764 Finder guides across topics including:
  • Home loans
  • Credit cards
  • Personal finance
  • Money-saving tips
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37 Responses

    Debbie Brown's avatar
    DebbieApril 4, 2026

    My husband and I get a full age pension with a small top up each fortnight from a superannuation stream. We own our home which would now be worth about $1 million if comparing to surrounding properties. We would like to release some equity in our home so are we better to take out a reverse mortgage or get an equity credit line from a bank. We are looking at about $100,000 equity line. Initially we only want to draw about $30,000. We could probably handle paying interest only on a credit line in our normal budget. Thank you.

      Rebecca Pike's headshotFinder
      RebeccaApril 14, 2026Finder

      Hi Debbie,

      As a financial comparison site we’re not licensed to be able to give you specific financial advice. They both have factors to weigh up and the right option for you would depend on your circumstances, so it’s probably worth reaching out to a mortgage broker.

      Regards,

      Rebecca

    Selena's avatar
    SelenaJanuary 26, 2026

    Hi, I wonder the exact period to get ‘Line of Credit’ Loans in Australia.
    1) How long does it take to get pre-approval?
    2) How long does it take to get unconditional approval, after I get pre-approval?
    3) How long does it take to get final settlement after I get unconditional-approval?

      Sarah Megginson's headshotFinder
      SarahJanuary 30, 2026Finder

      Hi Selena,

      This depends on the lender and your application. Some lenders can process a loan application within a matter of hours, if you have all of your paperwork in order and there’s no missing information or questions. Others can have a queue of up to 20 business days before they even look at your application. Unconditional approval comes once all documents are submitted and all queries have been answered, so the more prepared you are with detailed paperwork, the faster the process becomes. If you need a fast settlement, it might be worth working with a mortgage broker, who can help match you with a lender that has lending policies that best match your criteria and deadlines. Hope this helps!

    Paul F's avatar
    PaulMay 10, 2025

    Hi What banks now off personal line of Credit similar to what ANZ Bank used to offer with their Equity Manager Account !

      Rebecca Pike's headshotFinder
      RebeccaMay 13, 2025Finder

      Hi Paul,

      Several banks offer line of credit home loans. AMP has a few options available for various LVRs and loan amounts. Queensland Country Bank, Hume Bank and Greater Bank all have options.

      If you’re looking for something specific as part of your line of equity loan, it might be worth talking to a mortgage broker to find the best one for you.

      Thanks,

      Rebecca

    David's avatar
    DavidMarch 17, 2024

    I currently own my home with no mortgage and it’s worth about $650,000. My only income is a disability pension from Centrelink. I want to buy another property before I sell my property. Would I qualify for a loan in order to purchase the new property?

      Sarah Megginson's headshotFinder
      SarahMarch 25, 2024Finder

      Hi David,

      This depends on a range of things, but one of the main factors that banks and lenders consider is your income and savings and your ability to support the loan. Your best bet might be to speak to a mortgage broker who can help review your situation and see what options you have. Their services are free.

    Ricky's avatar
    RickyOctober 29, 2023

    I have unit paid off with 350k in equity but have a bad credit score as I was denied a 30k personal loan I already have an existing 30k loan I’m paying but desperately need $$ for some home renovations but having trouble finding a lender

      Richard Whitten's headshotFinder
      RichardNovember 6, 2023Finder

      You could focus on improving your credit score although this takes a few months at least. Talking to a mortgage broker might be a good idea as they can help you find a suitable lender, if you’re eligible.

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