Free investor tool
Debt recycling calculator
Model debt recycling year by year: paying down non-deductible home loan debt and re-borrowing the same amount to invest, then compare it with simply paying off the home loan.
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| Year | Home loan | Investment loan | Portfolio | Net position |
|---|---|---|---|---|
| 1 | $565,926 | $24,000 | $24,720 | −$565,206 |
| 2 | $530,161 | $47,579 | $49,748 | −$527,992 |
| 3 | $492,571 | $70,764 | $75,121 | −$488,214 |
| 4 | $453,017 | $93,584 | $100,879 | −$445,722 |
| 5 | $411,350 | $116,064 | $127,060 | −$400,354 |
| 6 | $367,412 | $138,232 | $153,705 | −$351,939 |
| 7 | $321,035 | $160,115 | $180,855 | −$300,294 |
| 8 | $272,041 | $181,739 | $208,554 | −$245,226 |
| 9 | $220,241 | $203,132 | $236,845 | −$186,527 |
| 10 | $165,434 | $224,320 | $265,774 | −$123,980 |
| 11 | $107,408 | $245,329 | $295,386 | −$57,350 |
| 12 | $45,936 | $266,186 | $325,731 | $13,609 |
| 13 | $0 | $286,918 | $356,857 | $69,939 |
| 14 | $0 | $286,918 | $437,509 | $150,590 |
| 15 | $0 | $286,918 | $522,839 | $235,921 |
| 16 | $0 | $286,918 | $613,120 | $326,202 |
| 17 | $0 | $286,918 | $708,639 | $421,721 |
| 18 | $0 | $286,918 | $809,699 | $522,781 |
| 19 | $0 | $286,918 | $916,623 | $629,704 |
| 20 | $0 | $286,918 | $1,029,749 | $742,831 |
How it works
How debt recycling works
Debt recycling converts home loan debt, where interest is not tax deductible, into investment debt, where interest generally is. Each year your surplus cash pays down the home loan, and you borrow the same amount through a separate investment loan to buy income-producing investments. The tax refund on the investment interest and the after-tax investment income are then used to pay the home loan down faster.
It increases your exposure to investment markets and relies on borrowing to invest, so returns can be negative as well as positive. The loan structure and tax treatment must be set up correctly, which is why it should be discussed with a licensed financial adviser and your accountant. This model is a simplified illustration that ignores fees, franking credits and changes in tax rates.
The numbers are one part of the decision
We look at the figures alongside growth drivers, vacancy, supply and how a property fits your borrowing and portfolio plans, then choose the market that suits your strategy, wherever it is in Australia. See how we buy investment property.
FAQ
Common questions
Is debt recycling legal in Australia?
Yes. It is a recognised strategy, but the loans must be structured so the investment borrowing is clearly separate and used only for income-producing investments. Get advice on the structure before starting.
What are the risks?
Investments can fall in value, interest rates can rise, and you still owe the investment loan whatever happens to the investments. It suits people with stable surplus cash and a long time horizon, not everyone.
Is this financial advice?
No. It is a general estimate to help you compare options. It does not consider your personal circumstances, and results depend on the figures you enter. Check them with your accountant, mortgage broker or financial adviser before you act.
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