I had an idea today around debt recycling and would appreciate some opinions on the strategy.
Let’s say you have a PPOR and an investment property and are currently paying them both off, to simplify this we can assume investment is interest only.
Investment costs (simple round numbers):
Interest - $500 week
Rates - $2000 quarter
Everything else - $5000 per year
Yearly cost = $33k
The Idea
Instead of paying any of the investment costs, you could increase the value on the mortgage by ~$70k, then pay all bills out of the mortgage. This will obviously increase its principle over time. Now the $$ that was to be used to pay the interest, rates, etc. would instead be put on the PPOR and pay it down. Basically increasing principle of investment and decrease PPOR. You could essentially do this for 2yrs and move 70k of non-tax deductible debt to tax deductible debt, without the need to physically move any money.
This maybe common, but I can’t find much about this strategy or if it is possible.
Your thoughts are appreciated!