Warehouse line of credit

A warehouse line of credit is a line of credit used by mortgage brokers to temporarily fund mortgage loans before selling them to permanent investors. It is a short-term revolving credit facility extended by a financial institution to a mortgage originator (a company that creates mortgage loans) for the funding of mortgage loans.

Warehouse lines of credit play make the mortgage market more accessible to property buyers, as many mortgage bankers would not be able to attract sufficient deposits necessary to fund mortgage loans independently. This financing mechanism allows these lenders to provide mortgages at more competitive rates while enabling institutions with limited capital to originate significantly more loans than their capital base would otherwise permit. The facility operates on a cyclical basis, with loans typically held for 10-20 days before being sold to permanent investors, allowing the credit line to be repaid and reused for subsequent loans.

The International Finance Corporation has set up warehouse lines of credit around the world and has developed a guide on how they work.

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