A line of credit doesn't hand you a lump sum. It gives you a limit you draw and repay, again and again.
Secured against the equity in your home, a line of credit works more like a credit card than a term loan: you're approved for a limit, you draw only what you need, and you pay interest only on the balance you've actually drawn — not the whole limit. It's flexible, and that flexibility is exactly why it needs discipline. Here's how the balance moves, and what to watch.
Draw, repay, draw again — under one approved limit.
This illustrative chart follows the drawn balance of a line of credit over a year. It rises each time you draw (▲), falls when you repay (▼), and sits flat when you only cover the interest (◇). The dashed line is your approved limit — the space between the top of each bar and that ceiling is available but unused, and costs you nothing.
Chart is fully illustrative — a made-up sequence on a made-up $100,000 limit, not a quote, an offer or a forecast. Real limits, balances and rates depend on your equity, the lender and your circumstances, and are confirmed in writing.
Three things that set it apart from a normal home loan.
A revolving, reusable limit
You're approved for a credit limit against your home's equity. Draw funds, repay them, and the room becomes available to draw again — without applying for a new loan each time.
Interest only on what's drawn
You pay interest only on the balance you've actually drawn, worked out on the daily balance — never on the unused portion of the limit above it. Draw nothing, and there's no interest to pay.
Secured against your home
Because it's secured by residential property, a line of credit can offer a lower rate than unsecured credit — but your home is the security, so it's a facility to use deliberately, not casually.
What drives the cost — and what it doesn't do for you.
Sources: RBA Cash Rate Target (held 4.35% p.a. at the 17 June 2026 meeting). Product mechanics and interest-only warnings are drawn from ASIC's MoneySmart guidance on line-of-credit and interest-only home loans. Figures are indicative and point-in-time; rates move with the cash rate and the market.
Flexibility with a purpose — three common ways it's put to work.
Renovations
Draw as each stage of a renovation falls due, rather than borrowing one lump sum up front — so you only pay interest on the money you've actually spent as the project progresses.
An investment deposit
Some investors keep a facility on standby to move quickly on a deposit or costs, then repay it from other funds. Investment structures have tax implications — get advice from your accountant before relying on this.
A cash-flow buffer
Held (but not drawn) as a safety net for irregular income or unexpected costs. Undrawn, it costs nothing in interest — the discipline is not treating the limit as spending money.
Not always the cheapest tool
For a one-off, known amount you intend to pay down, a standard term loan or an offset arrangement can cost less and enforce repayment. We'll compare the structures side by side for your situation.
Revolving credit is powerful — but it only works with discipline.
The same features that make a line of credit flexible are the ones that catch people out. ASIC's MoneySmart is direct about the trade-offs, and so are we:
- It doesn't reduce your loan. While you only cover the interest, you pay nothing off the principal, so the amount owed doesn't shrink — reducing it is a decision you have to make, and stick to.
- The rate is usually higher. Line-of-credit and interest-only facilities are commonly priced above a standard principal-and-interest home loan, so you can pay more over time.
- It's optional, and can cost more. MoneySmart lists line of credit among home-loan features that could cost you more — worth weighing against a plain, cheaper loan.
- A limit isn't a budget. Because the room refills as you repay, it's easy to keep drawing. Treating the limit as available spending is how a flexible tool becomes a permanent debt.
Used deliberately, with a plan to pay it down, a line of credit can be a genuinely useful facility. Our job is to make sure it's the right structure for you before you commit — and to show you the alternatives if it isn't.
Source: ASIC MoneySmart — line-of-credit and interest-only home loan guidance (2026). General information only; consider whether the product is right for you and seek advice for your circumstances.
On rates — the honest, indicative version.
Indicative only — and it moves
We can't quote a rate on a web page, and we won't pretend to. As a broad, indicative guide, variable line-of-credit facilities in the market have been sitting somewhere around 6% to 9%+ p.a. as at July 2026, and they're commonly priced a little above a standard variable home loan. That's a range for context, not a "from" rate and not an offer.
Because these facilities are typically variable, the rate moves with the cash rate and the market — for example, ANZ increased variable rates on home, investment and line-of-credit loans by 0.25% p.a. from 15 May 2026. When the cash rate moves, your repayments generally move too.
A comparison rate is designed to help you work out the true cost of a loan by including certain fees and charges; it's based on a standard scenario and may not reflect your situation. Any rate shown here is indicative only, as at the date stated, not an offer of credit, a quote or a guarantee of approval or a particular rate — your actual rate depends on the lender, your equity, LVR and circumstances, and is confirmed in writing.
Line of credit loans, answered straight.
What is a line of credit home loan?
It's a revolving loan secured against your home's equity, giving you an approved credit limit you can draw from and repay as you like. Rather than receiving one lump sum, you access the funds as you need them — and you can redraw the room again as you repay, without applying for a new loan each time.
How is interest charged?
You pay interest only on the balance you've actually drawn, calculated on the daily balance — not on the whole limit. If you draw nothing, there's no interest to pay. The unused portion of your limit sits available at no cost until you use it.
Does a line of credit pay down my loan or build equity?
Not on its own. A line of credit is interest-only by nature, so covering the interest doesn't reduce the principal — the balance stays put unless you deliberately repay more than the interest. If you want to steadily pay debt down, a principal-and-interest term loan is usually the better structure.
What can I use it for?
Common uses include funding renovations in stages, keeping capital ready for an investment deposit or costs, or holding an undrawn buffer for irregular income. Investment and tax outcomes depend on your circumstances, so get advice from your accountant before relying on it for those purposes.
Is a line of credit riskier than a normal home loan?
It asks more of you. Because the limit refills as you repay, it's easy to keep drawing and never reduce the debt, and the rate is often higher than a standard loan. ASIC's MoneySmart lists it among features that can cost you more. Used with a clear repayment plan it can be very useful — the risk is treating the limit as spending money.
What rate will I pay?
We can't quote a rate on a web page. As an indicative guide, variable line-of-credit rates have sat broadly around 6% to 9%+ p.a. as at July 2026, usually a little above a standard variable home loan. They're variable, so they move with the cash rate and the market. Your actual rate depends on the lender, your equity and your situation, and is confirmed in writing.
Thinking about a line of credit? Let's pressure-test it first.
Tell us what you're trying to do with your equity — and we'll compare a line of credit against the alternatives across our panel, so you commit to the structure that actually fits. No credit check to start.
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