What is a Readvanceable Mortgage

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 LOC by the amount of principle you pay off each month. Some lenders do this automatically. Sometimes you have to request the credit increase manually.

                                               You make mortgage payments

                                                 Your line of credit increases

Here's an example. Suppose you have a $100,000 readvanceable mortgage. Your monthly payment will be $610 (assuming 5.5% interest and a 25-year amortization). Of this $610, let's suppose $445 is interest and $165 is principle.

With a readvanceable mortgage, as soon as you make a payment you can then borrow back whatever principle you've paid. So if you make your $610 payment above, the lender will increase your credit line by $165. The more payments you make, the more your credit line grows. The best part is that you don't have to reapply for the additional credit and your growing credit line has a very good interest rate.

Readvanceable mortgages are great for people who need a growing source of funds for:

• Unexpected emergencies
• Investments
• The Smith Manoeuvre
• Unexpected job loss
• Business expenses
• Health care expenses
• Education costs

There are lots of readvanceable mortgages to choose from. Here is a comparison of readvanceable mortgages to get you started. We update this comparison whenever new readvanceables become available.