| Debt Recycling | |
| Investments - Growth Investment |
 Debt recycling allows you to pay off your mortgage, but recycles the debt and uses it as an investment tool. Debt recycling means using the difference between the amount owing on the mortgage and the value of the property to potentially reduce your mortgage, whilst building a sizeable nest egg.
Debt recycling involves 4 key steps: 1. Use your home equity for a separate investment loan 2. Use the money borrowed to invest in assets, for example, shares or managed investments3. Use the investment income and tax concessions from the geared investments to reduce your outstanding home loan balance 4. This process continues each year until your home loan is repaid, after which, the surplus income (includes your investment income and tax advantages) are used to acquire additional investments or to pay down your investment loan Some of the benefits of debt recycling include: • Replacing inefficient (non tax-deductible) debt with efficient (tax-deductible) debt on a regular basis • Establishing an investment portfolio sooner • Reaches your lifestyle goals faster Before you implement any strategies regarding debt recycling, please take these points into consideration:• Make sure your investment loan allows you to make interest-only repayments so you can direct the money into paying down your home loan Once you have paid off your home loan, you have the choice to use surplus cash flow to purchase more investment assets or to reduce the debt on your investment loan. Assuming the after-tax return from your investments are greater than the interest cost (which is tax deductible), you are better off investing, as long as you are comfortable with the total level of debt. Debt recycling is just one of many investment strategies designed to build your wealth, but we recommend that you speak to an Intellichoice financial planner first to discuss whether it is suitable for your situation. Call 1300 55 10 45 to speak to our financial planner and we will be able to advise whether debt recycling or other types of investments are ideal for you. |
| Last Updated ( Tuesday, 18 May 2010 10:04 ) |
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