Fast track home loan repayments and reduce tax using investment income

This is our fourth article on debt recycling. You can view our third article “Turning home equity into wealth creation” here.

In this edition, we look at debt recycling and through our process, how it can use investment income to literally fast track your home loan repayments and minimise your tax liabilities with no change to your current cash flow or indeed, lifestyle!

A question of equity

In our last edition, we looked at the family home and noted as a standalone investment, it did little in the way of generating income or tax advantages.

We considered leveraging your home equity to create an investment opportunity as a key component of the overall debt recycling strategy. (link)

We then looked at the exponential benefits of being able to access smaller, but regular amounts of your home’s equity to drive investment wealth and tax advantages.

Let’s now see how income from these investments can pay down your home loan and save you tax at the same time.

Investment income

The good news is that the debt recycling process allows you to use the equity in your home even if you have not paid it off yet.

While this may seem a strange practice to our parent’s generation – who typically paid their home loan off before they even began to consider investing – debt recycling presents a unique opportunity to invest earlier and benefit longer.

With the completely legitimate ability to immediately access smaller and regular (equity) amounts, you can create an investment portfolio. The revenue stream from the(se) investment(s) can then be directly applied to your home loan repayments.

This compounding of income – both your current repayments and the investment income – will dramatically decrease your home loan debt and save tens of thousands of dollars of  interest while driving down your principal.

A taxing question

There are also significant tax savings that can be achieved through debt recycling.

When you borrow to invest through a planned debt recycling program, you are able to claim interest payments as a tax deduction.

Because of this tax-deductibility, you create tax savings which you can put toward your home loan. This is particularly beneficial for those on higher tax rates.

In addition, these payments are pre-tax giving you an even greater advantage.

A win/win!

By the numbers

By investing now with a planned debt recycling strategy, you have the ability pay down your home loan in say, 10-15 years rather than 25 or 30!

What is amazing with this process is while this is happening, you are also building wealth through your investment (capital and ultimately income) and saving on tax.

In a nutshell

So, when done via a professional debt recycler, you can:

Create an additional income stream to fast track your home loan repayments

Compound your loan repayments to dramatically reduce your interest, principal and home loan period

Require no change to your current lifestyle

Build investments (and wealth) + save on tax