Debt redistribution

Hello - my first post here - what an informative bunch you are.

Here is our problem - we are fortunate to have an investment property with only $30K left to pay but have $120K left on our own mortgage. The investment is rented to family who we have to house for the next probably ten years and although in time it will be a solid little earner, at the moment we can charge only minimal rent and income pretty much equals outgoings. So I would dearly love to redistribute our own mortgage against the rental but beyond setting up a family trust and selling investment to it, can't think of any other legal way to do it. And no, I don't think the initial and ongoing hassle of a trust is worth it.

Any other ideas? We are currently coming into a stage of our lives where we can negatively gear something else, whether shares/property etc, but I want our home paid off first.

Quandry.

Thankyou
Bonnie.

 

Do a search on 'debt recycling' it's exactly what you're after. Posts by others can probably explain it better than me.

 

Bonnie,

Welcome.

Your 120K mortgage is against your PPOR, therefore it is not for investment purposes!!!! No amount of rearranging will convert this into an investment loan.

You need to either bite the bullet and pay it off as quickly as possible (and debt recycle) or convert it to an IO loan and basically ignore it (except for the minimal payments) whilst you divert other funds/equity to some form of investment. (Obviously there is a middle road but that is your choice.)

Tailcat

 

However if you've got equity built up in the property you can redraw that in a LOC (which is tax-deductible) and invest it.

 

Thanks for your comments. A lot of this is in how you 'see' things isn't it - in my head is that increasingly old fashioned concept of 'own your own home first' so the redraw and LOC scenarios rub a little.

Thankyou - food for thought. Have read through a lot of the debt recycling stuff so will go do more research.

Bonnie