What is a revolving credit mortgage?

It is a flexible loan that works like a large overdraft against your home. Your income and savings sit in it, reducing the balance interest is charged on, and you draw on it as needed. Used with discipline it can cut interest and shorten the loan.

How does revolving credit save interest?

Interest is charged on the daily balance, so every dollar of income or savings parked in the facility reduces the balance and the interest, until you spend it. The more you keep in it, the more you save.

Is revolving credit risky?

It requires discipline, because the credit is always available to spend. Without a plan to keep the balance falling, it can become an expensive way to never repay the loan. It rewards good money habits.

Revolving Credit Calculator

This New Zealand calculator shows how a revolving credit mortgage facility can cut interest by parking your income and savings against the loan. You enter your balance, rate, income and spending pattern, and it estimates the interest saved compared with a standard loan, while flagging the discipline it requires. It demystifies a flexible but often misunderstood mortgage tool.

Revolving credit balance

Interest rate

Average funds parked in it

estimated interest saved per year by parking funds

Interest on full balance$0

Interest with funds parked$0

Interest is charged on the balance after the funds you keep in the facility. The saving depends on how much you keep parked and for how long, so discipline is key; the credit is always available to spend. Estimate only, not financial advice.

How it works

A revolving credit facility charges interest on the daily balance, so any income or savings you keep in it reduces the balance and the interest until you spend it. The calculator works out the interest on the full balance and on the balance reduced by your average parked funds, and the difference is your annual saving. The more you keep parked, the more you save, which is why it rewards good cash-flow habits.

Worked example

On an $80,000 revolving credit balance at 7%, the interest is about $5,600 a year. Keeping an average of $12,000 of income and savings parked in it reduces the balance interest is charged on, saving roughly $840 a year, while that money is still available if you need it.

Related calculators

Offset vs Savings Calculator: offset benefit.
Mortgage Offset Calculator: offset accounts.
Mortgage Repayment Calculator: repayments.
Offset and Revolving Credit guide: how they work.

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