Managing your mortgage can be about more than just making regular repayments — it can also be about smarter use of your money every day. If you’re looking for a flexible, powerful way to reduce interest costs and pay off your home loan faster, a revolving credit mortgage could be the right solution.
At The Advice Group, we specialise in helping clients match their financial situation and lifestyle to the best loan types available. In this guide, we’ll break down exactly how a revolving credit mortgage works, the key differences from other options, and what you need to know to make an informed decision.
What is a Revolving Credit Mortgage?
A revolving credit mortgage works much like an overdraft attached to your home loan. Instead of having a traditional repayment structure, you combine your income, savings, and everyday spending into a single revolving credit account.
You are charged interest on the daily loan balance rather than on a set loan amount. The more money sitting in the account — even temporarily — the less interest you pay over time. This allows you to use your normal cash flow to save on interest and chip away at your mortgage balance faster.
A revolving credit home loan has a floating interest rate, meaning it moves up and down with the market. This gives you flexibility, but it also means you need to actively manage your money to get the best results.
How is a Revolving Credit Mortgage Different from an Offset Mortgage?
Both revolving credit mortgages and offset mortgages aim to help you pay less interest on your home loan, but they operate differently.
With an offset mortgage, your savings are kept in separate accounts, and the bank “offsets” the balance against your loan, reducing the amount of loan interest charged. You still make regular repayments based on your original loan amount.
With a revolving credit mortgage, all your money goes into one transactional account that also acts as your mortgage account. There’s no separation — it’s all combined, and interest charges are calculated daily on the outstanding balance.
The key differences come down to how accessible your funds are, how repayments are structured, and how much financial discipline is required. Both have pros and cons depending on your individual circumstances.
How Revolving Credit Mortgages Work
When you take out a revolving home loan, you are given a credit limit. You can withdraw money up to this limit at any time, just like a normal bank account.
Every dollar of income you deposit into the account reduces your loan balance immediately, which means less interest accrues. Meanwhile, your day-to-day spending draws from the same pool, causing the balance to rise again.
Unlike a traditional home loan, there are no fixed repayments. However, you must meet minimum repayments to keep your account in good standing.
Because interest rates are variable, your interest payments can change month to month, which makes budgeting important.
Benefits of a Revolving Credit Mortgage
The major advantage of a revolving credit mortgage is the potential to save money and reduce interest costs. Some key benefits include:
- Paying less interest by keeping your daily loan balance as low as possible
- Using extra money (like bonuses, tax refunds, or rental income) to immediately impact your mortgage
- Flexible borrowing when you need it, without needing to apply for a top-up
- Simplifying your finances by having one everyday account linked to your loan
If managed well, you can pay off your home loan sooner and save thousands in interest over the life of the loan.
Credit Limits and Equity Requirements
Most lenders, including major banks, offer revolving credit mortgage options. However, they will typically require you to have a certain amount of equity in your property — often 20% or more.
Your approved credit limit will be determined by your financial situation, property value, and other debts like car loans or credit card balances.
Banks also assess whether your income is stable enough to handle the variability of a floating interest rate and ensure you can comfortably meet regular repayments.
Is Revolving Credit Right for Irregular Income?
If you have an irregular source of income — such as from commission sales, contract work, or property investment — a revolving credit home loan can offer valuable flexibility.
Instead of struggling to meet set repayments during lean months, you can pay as much money as you have available and draw on the account if needed. This ability to redraw funds without penalty can provide a vital safety net.
However, it’s crucial to have a good understanding of your income patterns and seek professional advice to structure the account correctly.
Can You Reuse Repaid Funds?
Yes — that’s one of the biggest advantages. In a revolving credit mortgage, repaid funds remain available for withdrawal at any time, up to your credit limit.
This means you can use the loan like a separate account for big purchases or emergencies without needing to apply for a top-up loan. However, remember that withdrawing money increases your loan balance again, which means more interest charges.
Discipline is key if you want to keep making regular interest payments and stay on track to pay off your mortgage faster.
Budgeting and Financial Discipline
A revolving credit mortgage can work brilliantly if you have strong financial discipline. Because the account acts like a regular savings account or transactional account, it’s easy to spend the available funds and lose the benefits.
Set a monthly budget and treat the loan as if it’s a traditional mortgage. Make regular payments to reduce the overall outstanding balance. Avoid unnecessary spending that can lead to more interest being charged.
If you’re worried about temptation, a split loan structure — with part fixed rate and part revolving credit — could offer a balanced solution.
Comparing Other Loan Types
Compared to a traditional fixed rate or floating rate mortgage, revolving credit mortgages offer far greater flexibility but require more active management.
- Fixed-rate loans offer predictable payments but little flexibility.
- Floating-rate loans provide flexibility but don’t have the daily interest-saving power of a revolving credit account, and don’t allow you to redraw funds.
- Offset mortgages separate savings from your loan but may have different fee structures.
Choosing the right loan and structure depends on your financial goals, habits, and ability to manage your cash flow.
Fixed Rates vs Revolving Credit
Choosing between a fixed-rate loan and a revolving credit mortgage often comes down to risk appetite.
A fixed-rate offers stability — you’ll know exactly what your interest payments are for an agreed period. A revolving credit mortgage comes with a variable interest rate and the potential to save money, but there is also the risk of paying more interest if you don’t manage the account carefully.
Many borrowers find that splitting their mortgage between the two offers the best of both worlds.
Is a Revolving Credit Mortgage Right for You?
A revolving credit mortgage setup can be a powerful tool to save on interest, accelerate your journey toward a debt-free life, and offer daily financial flexibility. However, it’s not for everyone.
Strong budgeting skills, financial discipline, and a clear understanding of how interest charges work are crucial to making a revolving credit mortgage successful.
At TAG, we can help you assess whether this flexible option suits your individual circumstances or whether other loan types would deliver a better result.
How TAG Helps You Choose
Choosing the right home loan structure isn’t just about the best rate — it’s about finding the best solution for your lifestyle, income, and financial goals.
The Advice Group’s mortgage advisers work with you to create a customised lending strategy, whether that’s a revolving credit mortgage, a fixed rate setup, or a smart combination.
Talk to us today to explore your options, manage your money smarter, and start paying your mortgage off faster. Contact us here to see how we can help.
Frequently Asked Questions
What is a revolving credit mortgage?
A revolving credit mortgage lets you combine your home loan and everyday account into one. You only pay interest on the outstanding balance each day, helping you save on interest and pay off your home loan sooner.
How does a revolving credit mortgage save me money?
Because interest charges are calculated daily on the daily loan balance, every dollar you leave in your account reduces the interest you pay, potentially helping you save money over time.
Can I redraw the money I have repaid?
Yes, a revolving credit mortgage allows you to redraw funds up to your credit limit at any time, giving you flexibility for day-to-day spending or emergencies.
Is revolving credit a good option for people with irregular income?
Absolutely. If you have irregular income, a revolving credit account can help smooth cash flow, allowing flexible borrowing and fewer worries about fixed monthly repayments.