Hi
Just wondering what the best lenders are for debt recycling your mortgage? The major requirement I have is to be able to split my mortgage into several parts. AMP seem to be the best as they allow for up to 10 splits. Is there anyone else. Limitations of just one split won't work for me as I will be looking to add further splits in time for debt recycling. Does anyone use another lender? Also good if there is a offset account option for the original mortgage amount.
Thanks
Bruiser
Here I was just putting all the bills in the paper shredder…
Is debt recycling still viable with current interest rates?
Yes, even more so since you are converting non-deductable debt into deductable debt. No increasing your overall debt.
exactly
Sure, but you're maintaining a level of debt instead of reducing it. If the gains aren't offsetting the interests incurred, even with deduction, then it's of less value.
The higher your tax bracket, the better your return, as you can deduct your interest and get 42% of it back vs 30% if you are on a lower tax tier.
Macquarie Bank is also a great option.
Thanks. I ended up going with Macquarie.
NAB on their package works for me. Several splits.
Debt recycling is a fad invented by mortgage brokers in order to win more customers.
The ATO don't look at the structure of the loan, rather the purpose of the funds being redrawn. Here is TR2000/2 - a taxation ruling made in 2000 specifically dealing with this and confirming that interest on the portion of redrawn funds used for taxable purposes is tax deductible. You don't need loan splits, just a record of the redraw amounts and dates you made them.
The only reason you would want multiple loan splits is if you want the bank to spoon feed the interest calculations to you. But a simple excel spreadsheet is all you need. Any lender that provides unlimited loan splits (like Pepper/MyLoan Elect) will be poorly priced and you'll be paying for the service.
Plenty of ATO Community discussion if you search for 'Debt Recycling' there
I am looking at doing it from a redraw only account and wanted to know if you could share what you would include in your spreadsheet to easily track it?
The only reason you would want multiple loan splits is if you want the bank to spoon feed the interest calculations to you.
No, this is not correct. The major difference occurs when you make repayments on the loan. If you only have a single loan account, then you need to apportion the outstanding loan balance between the deductible and non-deductible components. You are correct that you can then apportion the interest based on that. But when you make repayments, you have to apportion the repayments in the same way, so you are reducing both the deductible and non-deductible components proportionally. If you want to direct extra repayments just to the non-deductible component, you can't because the loan is mixed. Also, every time you redraw any additional amount from the loan (be it for personal or investment purposes), you need to recalculate the apportionment between the 2.
Anyone using St George for debt recycling purpose? Does it work well?
For those of us not in know, what is the advantage of splitting the mortgage up like this?