You might have heard of a strategy called debt recycling – it sounds complex, but it’s actually a smart and practical way to use your home loan to build wealth over time.

If you’ve got savings sitting in an offset account, this could be worth understanding, especially if you’re planning to invest in property or shares 💰

Here’s a simple example:

• Your home is worth $1,000,000

• You owe $600,000 on your mortgage

• You’ve got $200,000 sitting in your offset account

• You’re planning to buy an $800,000 investment property

Most people would just take the $200K out of their offset and use it for the investment property deposit and stamp duty. But there’s a smarter way.

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The better approach? Debt recycling.

Here’s how it works:

✅ Use the $200K in your offset account to pay down your home loan, bringing it from $600K down to $400K
✅ Then, re-borrow the $200K as a new loan split
✅ Use that split loan to fund your investment property deposit and stamp duty

Now you’ve just restructured your debt:

✅ Your non-deductible home loan is lower at $400k 
✅ The new $200K loan, used for investment, is tax-deductible
✅ Your money is now working harder without increasing your overall debt

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The new loan structure would look like this:

🏠 Property 01: Owner occupied property worth $1m

Loan 01: $400K – Owner-occupied home loan (non-deductible)

Loan 02: $200K – Investment loan used for the 20% deposit and stamp duty on the $800K investment property (tax deductible) 

🏠 Property 02: Investment property worth $800k

Loan 03: $640k Investment loan 80% loan secured against the investment property (tax deductible) 

That’s the essence of debt recycling: you’ve turned non deductible debt into deductible debt – magic! 

It applies to shares too. In the example above – the $200k could be used to purchase shares instead. Given the “purpose” of buying shares is “investment” related – the $200k loan split would become deductible. 

⚠️ Of course, this needs to be set up properly. It’s important to speak with both a mortgage broker (that’s me) and your accountant to make sure it’s the right fit and correctly structured. But when done well, it can accelerate your financial progress and make your money work much harder for you.

Keen to explore whether this could work for your situation? Just reply to this email – happy to walk you through it.