Debt recycling loan split

Hi all,

Asking this for a friend regarding debt recycling as he asked for my inputs and I want to give him the correct opinion.

He wants to do debt recycling and want to stick to his current bank and not refinance.

Outstanding PPOR loan say Loan A of 300k fully variable. Start off with debt recycling of 50k.

Does he need to pay 50k into Loan A and then request for a split of 50k ? Loan A 250k, Loan B 50k
OR
simply ask the bank to first split the Loan A 300k into two loans Loan A 250k, Loan B 50k with redraw and new offset account , pay off Loan B 49,999k ensuring $1 is remaining on the loan so the loan doesn't close automatically. Now, redraw 49,999k into the Loan B attached offset account , transfer to brokerage account without any detour and buy long term ETFs.

He checked with the bank and they are ok to split the loan. Please let me know if either two options are ok in regards to debt recycling or which of them is the best option.

Thank you.

 

He needs to split first - he should

 

Thanks Terry. So I understand he should do this ?

"Ask the bank to first split the Loan A 300k into two loans Loan A 250k, Loan B 50k with redraw and new offset account , pay off Loan B 49,999k ensuring $1 is remaining on the loan so the loan doesn't close automatically. Now, redraw 49,999k into the Loan B attached offset account , transfer to brokerage account without any detour and buy long term ETFs."

 

He should seek his own tax advice if he wants to know what to do

 

Thanks Terry..will convey the same to him.

 

Coming to my situation, I did an equity release of 100k from my PPOR to fund 20% deposit for an IP. This 100k is secured by my PPOR.

The remaining 80% is borrowed against IP.
4 years down, IP has grown in value and have enough equity.

I was hoping if I can substitute the 100k security from PPOR to IP.

Reason : This will free up the available equity in my PPOR and I can implement a debt recycling strategy. Of course, I will seek tax advice

Thanks

 

Depends on serviceability, need to check that first, properly.
Suggest you engage a decent mortgage broker to assist you.

 

That should be doable

 

Thank you. I will look into this.

 

Thanks Terry. As usual, you put people in the right direction. Really appreciate your time.

Regards