Debt recycling and split loan

Hi All,

I have been reading a lot regarding Debt Recycling strategy.

Here is my situation
PPOR loan - 230k (P+I, 3.5%)
Offset account linked to PPOR - 230k.
Basically, I am not paying interest on the PPOR loan. The interest component of the loan is going towards reducing the principal. I can leave this set up as is and eventually the loan gets paid off in few years.

I can request the bank to split the main PPOR loan into two. Eg
- PPOR Loan A 130k
- New split loan PPOR Loan B 100k (with redraw facility and offset account)

I would like to pay off this split loan 100k using the offset funds and then redraw every month 10k and buy units in LICs/ETFs. (Dollar cost averaging).

Any dividend income will go into the offset account of the PPOR Loan A.
Are there any draw backs with this approach. Am I missing anything important to consider. Please advice any pros or cons with this approach.

Thanks

 

@Terry_w - can you please provide some inputs on this.

Thanks

 

Check out my posts in the tax section on debt recycling and splitting loans. And get some specific tax advice.

 

@gkp any reason why u want to only do $100k? my guess is the remaining amount is for a non-deductible purpose?

from my opinion, only thing to consider is make sure you buy shares/etfs etc that are returning more than your interest rate!

If it was me, I would be doing more, and aim to set up a facility as much as you can borrow pending cash flow / equity!

 

@gkp or anyone else: In order for $100k Debt-Recyling loan interest to be tax-deductible, shouldnt the dividend income be directly credited to the (non-tax deductible) Home loan? Or does it not matter i.e. the dividend income can be credited to any offset account.

 

It doesnt matter.

 

thanks for clarifying @Terry_w