Debt Recycling Calculators

Discussion in 'Share Investing Strategies, Theories & Education' started by Captain Goodvibes, 28th Oct, 2019.

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  1. Captain Goodvibes

    Captain Goodvibes New Member

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    Went to a Peter hornhill presentation a couple of weeks ago. Looking to consider a loan restructure to debt recycle using LICs.

    Purchased property for 900,000 December 2018

    PPOR Loan 350,000 (P&I, variable, 2.77%)

    First split would be:

    Loan 330,000

    Split 20,000

    Just looked at the AMP professional package for loans split flexibility. Using their comparison calculator I would be paying an additional $1,800 a year to access this product. Their P/I rate is 3.57

    Return of a first split invested into LICs would be well below additional repayments to use the AMP product.

    Can anyone recommend a spreadsheet/calculator so I can get my uneducated head around debt recycling? Having a global view of the inputs/outputs needed to assess the strategy would be appreciated. Unfortunately I have the average intelligence of a Labrador woof woof, so any assistance is appreciated.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    I don't know of any, other than expensive financial planning type ones.
     
  3. inertia

    inertia Well-Known Member

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    I've been trying to put one together to demonstrate to my wife how debt recycling works, and the impact on repayments, but it has been pretty manual and not very elegant. I'll keep at it.

    Cheers,
    Inertia
     
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  4. paulF

    paulF Well-Known Member

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  5. Captain Goodvibes

    Captain Goodvibes New Member

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    I'm at the same level Inertia, presenting the concept to the Ministry of Finance :)
     
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  6. ShireBoy

    ShireBoy Well-Known Member

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    From what I can decypher from that calculator is that it's for selling down your shares at the end of the period (I'm going to go with the default 5 years).
    The Mortgage Interest Rate in the assumptions is the rate you borrow funds to buy shares with. Not your PPOR loan. The PPOR loan doesn't seem to factor into any of this (both sides of the equation elimination?)
    One the right Plus Investment Return is the cumulative compounded return over 5 years, and you sell down, taking advantage of the 50% CGT discount.

    So it's not really a DR calculator, since it doesn't really show the comparison between your PPOR debt and investment debt. It doesn't take into account using the dividends each year to pay down your PPOR debt. It's more of a "Borrowing to invest calculator", which shows the benefit of using deductible debt to lower your taxable income.
    But the basics are there.
    You'd need a slightly more complicated model which shows your PPOR debt shrinking each year and your inv debt growing. It shouldn't be too hard to whip up, just tricky to do the calcs depending on your tax bracket.
     
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  7. inertia

    inertia Well-Known Member

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    I had seen that calculator a while ago and found the same deficiencies. The tax bracket thing isn't too hard to manage, and I even set up some rules around buffer and split targets, but found it doesn't quite have the automation I'd like to make it worth publishing.

    Cheers,
    Inertia.
     
  8. Redwing

    Redwing Well-Known Member

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    Contact Patrick Shi at that site, you will find him helpful
     
  9. euro73

    euro73 Well-Known Member Business Member

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    Are you sure their P&I rate is 3.57%? I believe it's 3.14% for any loan 250K +

    Screenshot 2019-11-17 21.21.40.png Screenshot 2019-11-17 21.21.55.png
     
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  10. Captain Goodvibes

    Captain Goodvibes New Member

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    Thanks for your question euro73. The comparison rate on their site was 3.57%. So I'm assuming the comparison rate is not relevant to the loan value I'm currently servicing?. I guess the solution is to give them a call :)
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

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    Comparison rates are pretty bloody useless I think
     
  12. Anita whitty

    Anita whitty New Member

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    Did you end up finding a debt recycling calculator? I’m looking for one too.
     
    Last edited by a moderator: 20th Apr, 2020
  13. Anita whitty

    Anita whitty New Member

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    Hi Inertia,
    Would you be willing to share your spreadsheet with me please? I’ve tried creating one too and it’s so tricky.
    Cheers,
    Anita
     
  14. inertia

    inertia Well-Known Member

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    If I ever get it working to my satisfaction, sure :)

    At the moment it still has some manual tweaking. I pick it up every month or two when I am bored and chip away at it!

    Cheers,
    Inertia.
     
  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    the proprietary Systems from the planners side isnt a cheap product, but works well

    ta
    rolf
     
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