A readvanceable mortgage lets you reborrow the principal you pay off each month.
A readvanceable mortgage has two parts:
1. A “mortgage” portion
2. A line of credit (LOC) portion
As you make your mortgage payments, your lender increases your available LOC by the amount of principal you pay off each month. Some lenders do this automatically. Sometimes you have to request the credit increase manually.
The main benefit of a readvanceable mortgage is that it provides an ever-increasing low-cost source of cash. That liquidity can be invaluable for emergencies, investments, business or personal use.
A few things to note:
- Qualification standards are tougher for readvanceable mortgages
- You need at least 20% equity to get one
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Last modified: February 22, 2013
