Questions on re-financing and debt recycling

An update and more questions from my original post last year

Newbie looking for suggestion and advice

As mentioned in the original post, we split our mortgage into 700K and 300K loans, both loans are on principle and Interest repayment. We paid down the 300K loan with only $5 remaining in the account (Bank would close the account if less than $5). I then withdrew $100K to invest in shares. Current outstand balance on this loan is 9XK, with around 200K available for withdraw. I am planning to withdraw more to invest in shares.


All our salaries and extra cash (including money from share dividends) are deposited into the 700K loan, and I withdraw from it to pay for other purchases. So there is a clear separation from the 300K "investment loan".


Because my loans are basic loans, each month before the loan payment day I had to withdraw/transfer some money from the 700K loan account, put them into my regular daily account, so the bank could take the money to pay for loan repayment, and also for me to pay off credit card.


With other banks offering similar low interest rate but with offset facility, having offset accounts would be beneficial as I don't need to manually withdraw money from loan account to pay the loan repayment. I could just deposit all my money into the offset account and let the bank take the money from offset to pay for the loan each month.


My questions are, if I refinance with another bank for the same loan amount ($1M), and do the same split 700K/300K, but with offset on both. How would that affect my debt recycling? Do I have to sell all my existing shares and start the debt recycling again?

 

Refinancing won't change deductibility

 

Does it matter how the the original loan accounts are paid off?

eg if the new re-financed bank is also 300K/700K split. Do I need to pay the outstanding amount in original bank's 300K with the money from the new banks' 300K loan, and same for the 700K. so that the balance at with the new bank is the same as the original bank?

I don't want to pollute the 300K "investment loan" with the normal 700K loan.

 

Not sure what you mean

 

Let's say with my current loans at 700K/300K, for the 300K Debt recylcing loan, I've repaid the 300K and then withdrew 100K for share investment, now this loan balance is at -100K (with 200K for withdraw). For the 700K loan, I have paid 50K, so the outstanding balance is -650K.

If I re-fianced with another bank, with the same 700k/300K split, do I ask the new bank to pay the -100K with the money from the new 300K loand and the -650K from the 700K loan. So that after the refinance with the bank, the outstanding balance on the 300K loan would be -100K (wth 200K withdraw) and 700K would be -650K.


Because the reinfnance money is used ot pay off the original, then it would not be used for investment. I would need to explain to the tax man, that my 100K worth of shares was from the original mortgage, and "transferred' to the new re-financed loan. So I can get the same benefit as "withdraw" from the new refinanced loan.

 

You have borrowed $100k and invest so the interest on this may be deductible, depending on the circumstances.
The other $200k is unborrowed.

You could do the same think or split it

 

If I already have nabtrade with chess account...

Can I still buy shares with borrowed money and claim the interest?

Example:-
Current holding of share xyz 100 shares
Reborrow.money from PPOR $100, 000 to buy more shares (1000 shares) of xyz and now total holding of xyz is 1100 shares.

For documentation and claiming IR of $100K can I still use my existing Chess account under Nabtrade as long as I clearly document the $100 K spend and make a note of divis received etc.

 

Yes you can potentially. Just make sure there is no cash in the account.

 

Sorry @Terry_w - in-which account ?

 

In any account you put borrowed money into

 

I think to avoid any mistake- I am thinking to open seprate Chess account for DR with selfwealth.

Will there be any tax related issue for having more than 1 Chess account (other than extra reporting of 2 Chess accounts)?

 

I can't think of any issues