It is a kind of consumer loan at an interest rate similar to that of the mortgage. But you can only borrow an amount equivalent to what you have paid off on it. The loans are particularly attractive for people who want to buy a house and not going without other purchases - furniture, appliances, home remodelling, a car, a masters degree, a wedding or a good vacation.

For example, if someone who makes their mortgage payments regularly wants to buy a new car that costs 18,000 euros, normally they would go to a bank and ask for a personal loan, also called a consumer loan. Banks makes such loans at an average interest rate of 7.25% for a fixed-rate loan and 6.90% if the rate floats.

But in the case of a revolving mortgage, the same person could get those 18,000 euros at an interest rate 2.75 points lower than consumer loan rates. Also, they avoid a lot of red tape and fees.

Banks offer these discounts for two main reasons. First, risk is reduced because the bank already has the house as collateral. Also, they have already raised the interest rate of the mortgage itself by a point or so.This arrangement is an excellent incentive for customers that need to borrow a lot of money.

With the revolving-mortgage system, the bank or savings and loan lends clients the equity they have built up, at a price that has no real competitor among consumer loans. In Spain each bank has its own name for the offer. Hipoteca Abierta at Banesto and La Caixa, Hipoteca El�stica with Halifax, Cr�dito Abierto for Santander Central Hispano and Hipoteca Libre with Caja Madrid.

People who opt for this arrangement should know that the interest rate applied to their initial home mortgage will be slightly higher than with conventional home loans: the euribor plus 3 points, as opposed to euribor plus 1.25. But the system opens the door to future loans with that same bank under conditions that are more advantageous as long as the loan does not exceed what you have paid off on the house. The limit of the new loan is generally 48,000 euros at 10 years.

This is true for Caja Madrid, which in the spring of 2002 launched this kind of loan with the slogan How many dreams can fit in your mortgage? Caja Madrid lends 80 % of the assessed value of a house at a maximum of 30 years. The future loans depend on how much of the principal has been paid off, with a limit of 48,000 euros over 10 years.