Debt recycling is a strategy to focus on paying down your current non-deductible debt (a home loan) and while not paying down your tax deductible debt.

Debt recycling involves paying down your Home Loan, while leaving your investment lending Interest Only. As you increase the available equity in your Home you can draw down on your equity for investment purpose. Thereby making that portion of the loan tax deductible. 

Importantly, you can use assumed further income to service this draw down, for example you can use assumed rental income of a future investment property. 

You can also use these funds to purchase investments such as shares.

Once the drawn funds are invested the loan should be tax deductible. 

Of course, Lendtribe does not give tax advice nor is Lendtribe a tax agent, so please seek tax advice from you tax professional regarding debt recycling.

Keep in mind

  • Once you pay down your home loan and access the funding again for investment purpose, this portion of the loan will require investment rates which can be higher then Owner Occupied rates. 
  • This strategy requires you to have available cash to pay down your home or to focus ongoing cash flow on paying down your home loan. 
  • Don't jump the gun and pay off your home then apply for an investment  draw down. You need to make sure you are approved for this loan first. Otherwise you may be spending your cash savings on a strategy you cannot achieve.