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Readvanceable Mortgages2012-12-03T05:56:14-07:00

A readvanceable mortgage is a great way to access large funds that can be taken anytime and that too at decent mortgage rates. Your monthly payment will not only be used to pay off the loan, but will also be a source of investment.

In situations where a large amount of money is needed such as home renovations, medical emergencies or even unemployment, readvanceable mortgages prove to be a great help.

What is a readvanceable mortgage?

A readvanceable mortgage is like any other mortgage loan, but it also includes a line of credit. There are two main components: a mortgage portion and a line of credit. The line of credit will be built by the monthly payments, which will also be used to repay the mortgage amount.

How does a readvanceable mortgage function?

The monthly payment of a readvanceable mortgage comprises of two parts: one is used to pay back the principal amount and the other is used to pay back the interest accrued. The payments you make towards the principal add to your line of credit, and this amount can be borrowed whenever you wish. There are no restrictions on how the money is spent so you can use it for any purpose you want.

Why should you use a readvanceable mortgage?

A typical line of credit is characterized by a fixed limit. You cannot change this maximum limit unless you reapply for it. So if you need more equity, you will probably have to get your house appraised once more and register for the loan again. Obviously, this calls for quite a few legal and administrative expenses.

On the other hand, if you avail readvanceable mortgages, you can avoid this scenario and borrow any amount you want to without having to go through the process again.

Who is eligible to apply for a readvanceable mortgage?

Anyone can apply if he has a good credit score and a reasonable debt ratio.

What features should a readvanceable mortgage include?

There are many types of readvanceable mortgages available with different features. You should choose a product includes the following characteristics so that you can get the best of it.

  • Low interest rates
  • Automatic readvancing
  • Numerous sub accounts
  • Discounted interest amounts on the credit line

Are there any drawbacks associated with readvanceable mortgages?

There may be a few disadvantages which you should be aware of:

  • Interest rates may change with time even if they are fixed in beginning.
  • Your credit score will fall badly if you fail to make repayments.