A line of credit mortgage has been pushed as a way to save interest and pay off your mortgage faster, but in reality the savings are minimal and may not even cover the cost of changing over. So beware of anyone who is trying to persuade you to switch loans in this way.



How it works is by having your entire wage go into the home loan account, while you buy everything you need with a credit card. Of course, you must remember to pay the card off before the credit free time limit is up. You do this by withdrawing what you need from your loan account. Since the money you need to live on is not then in the account, there is no saving on interest for at least half the time.





An account to do this is called an offset account. Not only do you have the fees of switching to an offset account to consider, but also the interest on an offset account is usually quite a bit higher than a normal home loan. The repayments for a line of credit loan are smaller because you don’t have to pay off the principal - only the loan. But this means you could still have a large debt to pay when you retire. If you really want to save interest and pay off your mortgage more quickly, by far the best way of doing so is to make more repayments.