Before jumping in the deep end…
I’ve got a plan. I think it’s a good one, but I thought checking with the boffins in here might pay a dividend before I do something that could be expensive to undo.
I’m in the process of refinancing my house (2.5% fixed -> 5.84% variable, ouch) and thought at the same time why not:
- debt recycle
- leverage some equity for investing
- Sounds reasonable enough, right?
The context:
HHI: 450k, 50/50 split with partner, both mid 30’s
PPOR: worth 2.3+, owing 1.35
Around: 230k cash
Super balances: $215k each
The possible jaunt into unreasonableness is this. The new loan structure would be 1.25 ($100k debt recycled from current total owing) and two splits at $250k each for a total debt at $1.75m.
Why haven’t you done something sooner, you might say? Well the fixed term just finished and I’m not in the business of closing loans with interest rates we’re unlikely to see for the rest of this decade.
The arguments for:
We’re comfortably saving the loan repayment difference (+$5k) each month anyway and then some. Even with saving an additional $40k+ to max out super and carry forwards we’re still fine. So serviceability right now isn’t really an issue.
The arguments against:
It’s still a lot of debt and who knows what the markets will do, but volatility is a given and I feel we’re heading for volatile times.
Also the slide in housing prices is giving me pause, I don’t want to end up in a situation where my LVR creeps over 80%
Obviously I don’t have to take all the debt on and invest it right away and the optionality is nice but would eventually taking on that much debt for investment be crazy?
Really interested to hear your thoughts on all aspects of the plan and would love to hear if anyone is in a similar situation.
What would you do?