Debt Recycling - which config?

Hi all,

I bought my first PPOR earlier this year ($960k debt) so never had to think about debt recycling before, so trying to get my head around it. I've got 9 IPs and should be in a position to buy another in 6 months or so.

I just read this guide which was insightful, and I understand the concept and how it works.

It talks about the different ways you can do it (LOC, IO loan with split loan, P&I with split loan) as well as the benefits/drawbacks of each, which makes sense. So which way do you do it, and why?

Do all loans have the option to split loans, or do only certain banks support this?

For those who do it, do you use shares or property as the product youn invest in (or a mix)?

Thanks

 

Some lenders are better than others at spitting loans

 

Thanks both.

For my share investing strategy, I'll be using DRP so won't be pulling money out of shares to pay down debt as I go.

If I am stuck having to have the new split loan as P&I investment due to inflexibility of the bank, I guess the repayments are the same as they were when it was P&I PPOR anyway, the only difference being the interest portion becomes deductible.

I guess IO investment loan would be more ideal as it provides more funds to sink into shares/property

 

How will you be debt recycling if you do Drp?

 

Will just pay off chunks of PPOR debt with salary - I can have a 3 month period where I get paid $100k+ so will aim to pay down a $100k chunk at a time and then split the loan and invest etc. My PPOR debt is circa $950k so won't take very long to convert it to deductible.

I think it will get a bit complicated and a PITA if my trust gets the dividend, pays it to me, I pay off debt, loan back to trust, invest etc. I think a 'set and forget' DRP program would be easier to manage. And my dividends in the initial stages will only be a few hundred bucks here and there so not worth the hassle.

 

Have you considered a company to hold the share investments? I have a thread on this too

 

Nope, why would I do that? I'm guessing the company would be owned by my trust? So that profits can get sent to chosen beneficiaries?

 

It is a simple way to manage and profits could come out to the trustee shareholder to soak up losses.