Selling your home needn’t undo debt recycling. I’d substitute the security with a term deposit or your next home to keep it deductible.
In this listener Q&A I walk Dave through substitution of security and simultaneous settlements, and explain why I’d pay a little more for a flexible lender. I then answer Marcus on whether to offset an investment loan or use a high-interest savings account. On the top marginal rate the offset usually wins, unless a low-income spouse changes the maths. I also cover why I wouldn’t pay investment debt down to zero. For Michael, I explain why you shouldn’t keep an average property just for the negative gearing, and how much leverage a 30-year-old actually needs. Dominic asks about moving assets out of a family trust ahead of the proposed 30% minimum tax, and my answer is still to do nothing yet. Nathan asks who benefits from quarantined negative gearing, and what the UK’s experience tells us about housing affordability.
00:00 Nathan: who benefits from quarantined negative gearing?
01:19 Vested interests: new builds, commercial and offshore buyer’s agents
03:00 Why commercial property yields don’t stack up
04:34 Lessons from the UK’s property tax changes
08:32 Tax settings only move affordability at the margin
09:30 Dominic: moving assets out of a family trust
10:01 Two minimum 30% taxes, and why to do nothing yet
11:05 CGT rollover relief and the stamp duty problem
11:53 Will the trust tax be rescinded before the 2028 election?
13:49 What common-sense tax reform would look like
15:13 Business as usual for your discretionary trust
15:35 Michael: should I sell an average investment property?
18:00 Don’t hold an asset just for negative gearing
18:40 Property vs shares: the power of leverage
21:19 Never a bad time to sell a bad asset
23:07 Dave: debt recycling when you sell your home
24:21 Substitution of security using a term deposit
25:54 Simultaneous settlement from old home to new
26:27 If the bank repays your loan by mistake
27:16 Why lender flexibility beats a lower rate
29:01 Revaluations and using lenders in the right order
30:24 Marcus: offset an investment loan or use a savings account?
31:16 Comparing before-tax and after-tax interest rates
32:39 When a non-working spouse changes the answer
34:14 Why not to pay investment debt down to zero
35:47 Coming up: do you really need a financial adviser?
Related episodes:
Q&A: Upgrade or rentvest, home equity loans, and going non-resident
https://investopoly.buzzsprout.com/2005600/episodes/19862011-q-a-upgrade-or-rentvest-home-equity-loans-and-going-non-resident
Q&A - Choosing a pension account, topping up in retirement, and offset versus debt recycling
https://investopoly.buzzsprout.com/2005600/episodes/19803896-q-a-choosing-a-pension-account-topping-up-in-retirement-and-offset-versus-debt-recycling
Q&A - Deploying an inheritance, selling an average property, and funding a long retirement
https://investopoly.buzzsprout.com/2005600/episodes/19832494-q-a-deploying-an-inheritance-selling-an-average-property-and-funding-a-long-retirement
Q&A - Sequence of returns risk retiring early: bridging to super
https://investopoly.buzzsprout.com/2005600/episodes/19885744-q-a-sequence-of-returns-risk-retiring-early-bridging-to-super
Ep 425: Family trust investing: Are trusts still worth it under proposed tax changes?
https://investopoly.buzzsprout.com/2005600/episodes/19764156-ep-425-family-trust-investing-are-trusts-still-worth-it-under-proposed-tax-changes
Why common-sense tax reform is vital to Australia’s future
https://investopoly.buzzsprout.com/2005600/14044773
Optional:
Ep 426: The do not invest list: why good investors say no
https://investopoly.buzzsprout.com/2005600/episodes/19748907-ep-426-the-do-not-invest-list-why-good-investors-say-no
Ep 423: Negative gearing deferred - here's how to manage the cash flow gap
https://investopoly.buzzsprout.com/2005600/episodes/19680010-ep-423-negative-gearing-deferred-heres-how-to-manage-the-cash-flow-gap
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