Debt recycle pay down?

Hey guys have a quick question about a debt recycle equity loan…

-Plan on debt recycling the last 100k of my PPOR loan
-released seperate equity loan 100k interest only with offset account
-every month I put $10,000 savings into PPOR offset
-every month I pull out $10,000 equity and buy shares
-my overall debt hasn’t increased just made it tax deductible…

What I’m unsure about from everything I have a read is at the end when you have recycled the PPOR at what point do you decide to start paying back this equity loan if ever??? My goal is to build a long term passive share portfolio do you divert dividends to pay equity loan down haltering share growth instead of reinvesting them into more shares?

Any help would be greatly appreciated thank you

 

You would have 3 choices after all the loan is deductible interest
a) use income to invest and pay the minimum on the loan
b) use your income to pay off the deductible loans,
c) do a bit of both

What you do will depend on your outlook.

You might also want to consider whether to start debt recycling particular deduction loans. You would do this for 3 reasons
a) in anticipation of moving into one of the properties that loan was used for, or
b) to shift income from one spouse to the other or to a discretionary trust, even to a company perhaps.
c) estate planning reasons

 

Thanks for your reply Terry your a gun! loved the structuring pod you did with Matt from the Aussie fire bug, listened to it twice!

 

You dont pay it down, you let inflation do that. You can leave enough funds to capitalize interest if dividends arent enough, dividends can grow to be multiples of interest paid, and portfolio can grow to be multiples of loan. Usually it is better to use some CG harvesting and rebalancing overweight/overshot positions to replenish funds. Dividends can help tap property CG to increase funds.

 

Thank you for your reply! Sorry In advance but half of what you said was well over my head, basically what you are saying is leave the equity loan pay the minimal interest, and just keep diverting all new income into buying more shares and with time the portfolio will grow very large and just deal with paying off the equity loan at the end maybe during retirement for example? Did I understand you correctly, cheers for the feedback!

 

Thanks
Will be recording another one soon, specifically on debt recycling.

 

Say u have 3 split loans that have all been exhausted, can you combine them back into one loan without any tax implications?

 

Yes if the user of the money is the same and all the interest is deductible.