How the structure works
As you make payments on the mortgage portion, the equity you build becomes available to borrow against through the attached line of credit, without needing to reapply or requalify each time.
Common uses for the credit line
Homeowners often use the available credit for renovations, investment purposes, or as an emergency fund, since it can be accessed without going through a new loan application process.
- Home renovations and repairs
- Investment strategies like the Smith Manoeuvre
- Emergency access to funds without reapplying
Things to watch out for
Because the credit becomes available automatically, some homeowners find it tempting to use it for spending that doesn't build wealth or value, which can undermine your progress paying down the mortgage.
Who this product tends to suit
It works well for disciplined borrowers who have a specific plan for the available credit, such as funding investments or major home improvements, rather than those looking for a simple straightforward mortgage.
Frequently asked questions
- Does a readvanceable mortgage cost more than a regular mortgage?
- There can be slightly different fees or rate structures compared to a standard mortgage, so it's worth comparing the details with your broker.
- Can I get a readvanceable mortgage with any lender?
- Not all lenders offer this product, and the specific terms of how the credit limit grows can vary, so it's worth shopping around.
- Is the interest on the credit line tax deductible?
- It depends on how the borrowed funds are used. Funds used for investment purposes may have deductible interest, while personal use generally does not, so it's best to consult a tax professional.