What is a line of credit or revolving credit?
A line of credit also referred to as revolving credit is a loan that has a pre-determined limit. If your house is worth $300,000 you may have a credit line with a credit limit of $260,000 secured against your house. Your current mortgage may be $240,000 of this, this means that you have $20,000 that you can draw on and use at any time. The $20,000 is available immediately and you only pay interest on what you actually use. Many savvy investors leave this money in a line of credit account as an emergency reserve fund, just in case they need money in a hurry.
