Hi guys, This question might have been answered before, however, I couldn't find the direct answer, so thought I better put it in a separate thread. I have 500k PPOR loan with offset that has 500k To use Debt Recycling, what would be the best approach (something simple but good)? Am planning to use funds to buy investment property (will use 300k for a deposit) and ETFs. My idea was to split my current loan into 4 loans and do the following Loan A with offset account. 50K (just to have it for the rainy day) Loan B. 300K. Pay it down by putting 300K into it and keeping it there till I find a property to buy. Loan C and Loan D. 75K each for investing in shares and EFTs. am thinking to do the same with these two, will pay out both by putting 75K into each of them and then reborrow using redraw. Will be redrawing in small chunks from these 75K loans, say in 10Ks Is this a doable scenario? Majority of recommendations here are about keeping extra funds in offset, paying down in full and then reborrow to invest, but in my case my funds in offset are already equal to the loan amount so I thought the best way would be to pay down and keep money inside the loan. Am not sure if I'm correct with that. Thanks, Julia
Hi Julia Looks ok, and well done to be 100 % offset A little will depend on lender, and what they will allow, and what quirks they may have - for eg CBA loans auto close if paid down to zero Is the 300 for the total and costs of an IP or the the deposit and costs ? ta rolf
Thanks gentlemen! @Terry_w and @Rolf Latham you guys are the best! Friend of mine recommended I put up a fresh thread in PropertyChat, and am so glad I did! 1) Will need to talk to my lender, not sure yet what they allow, but at least I know know what I need. Worse case, I wont pay down to zero, will leave a few dollars behind. 300k is for the deposit and costs, will need a second loan to buy IP (will be looking for properties around 1mil). At this stage I just want to have everything ready (hopefully the right way) before I start looking for IP. If I can achieve 100% of IP to be fully deductible, that would be super of course (300K redrawn from that split and around 700K new IP loan). My main stable block was I wasn't sure if for debt recycling approach "split, then pay down and keep money inside the sub loans until it's the right time to redraw and invest" would be the right approach. And also I wasn't sure if I could redraw in chunks (that's for EFT investments). 2) Terry, thanks again for your reply and for confirming what I plan to do was correct. I haven't spoken to my accountant yet but it would be great if I could draw my accountant attention to the potential tax and credit issues. Could you please advise what did you have in mind when you said that? The more I know myself, the better. Top! Many thanks, Julia
I have written about 100 tax tips covering the various issues, have a read of some of those - Terry's Tax Tips
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