Mortgage loan or credit
Although the purpose of a mortgage loan and a mortgage credit facility is to obtain financing, there are important differences between the two. With a loan you receive the money at the outset, whereas with a credit facility you can draw down money up to an approved amount according to certain conditions.
Loans involve a bank granting you a fixed amount of capital that you undertake to repay in regular instalments over an agreed term. Therefore, both parties have a clear understanding of the total cost of the operation, the amount of interest payable and the life of the loan.
When it comes to mortgage credit facilities, your bank sets a maximum amount which it is willing to lend and you can make use of the full amount or not during a definite or indefinite period of time.
Example of a mortgage credit facility:
The bank allows you to draw down up to €120,000. In year 6 of the life of the credit facility, after you have already repaid €5,000 of capital, you have new financial needs, such as buying a car or refurbishing your home. Your credit facility agreement allows you to draw down again the €5,000 that you have already repaid subject to the terms and conditions on subsequent drawdowns.
FREQUENTLY ASKED QUESTIONS
Rounding a mortgage interest rateRead answerabout
Rounding a mortgage interest rate
Can my bank service other debts with the money deposited to pay my mortgage instalment?Read answerabout
Can my bank service other debts with the money deposited to pay my mortgage instalment?