Put the same monthly surplus to work two ways and compare where you land. One clears the home loan sooner; the other builds a portfolio behind deductible debt.
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Home › Calculators › Extra Repayments vs Debt Recycling
Both paths start from the same home loan, rate, term and monthly surplus. The scheduled repayment comes from your balance, rate and remaining term, and every figure moves monthly.
Once a year the tax effect of investment income minus investment interest is applied: a refund reduces the home loan, tax payable adds to it. The portfolio grows at the rate you enter. When the home loan reaches zero, recycling stops and the surplus repays the investment loan.
Compare net position, not the home loan balance. Under debt recycling the home loan often looks higher at year 10, because part of the surplus is paying investment interest. What you also hold is a portfolio against an investment loan.
Net position is the portfolio minus all debt, before tax on sale and selling costs. If you sold, capital gains tax would reduce the recycling figure, so a narrow lead may disappear.
Our guide to debt recycling vs extra repayments covers the certainty versus upside trade in more depth.
If the recycling net position is only slightly ahead, or behind, extra repayments give a similar result with no market risk. Each extra dollar saves your home loan rate, risk-free and tax-free.
Recycling also tends not to suit if your surplus is irregular, your income could drop, or your horizon is short. Try a lower growth rate: if the gap closes, the case rests on returns you cannot control.
When the numbers do favour recycling, the loan structure decides whether the interest stays deductible.
Alex can check your loan, your equity and your borrowing capacity, and tell you what the lending side would look like.
Request a call with Alex →Part of your monthly surplus pays interest on the growing investment loan instead of going onto the home loan. Investment income and any tax refund make up some of the gap, but not always all of it. The trade is a slower home loan payoff in exchange for a portfolio, which is why the net position is the figure to compare.
No. The net position is shown before any tax on sale and before selling costs. If you sold the portfolio, capital gains tax would reduce the debt recycling result. How much depends on how long you held the investments and your tax position at the time, which your registered tax agent can estimate.
Under debt recycling, recycling stops and the surplus starts repaying the investment loan. Under extra repayments, the freed cash is not modelled, so that path does not get credit for what you might do with it. Keep the comparison period close to when the home loan would clear for the fairest result.
Yes. Many people split their surplus, putting part onto the home loan or into an offset and recycling the rest. The calculator compares the two extremes so you can see the range. A blend sits somewhere between them, with less market exposure than full recycling.
Find the return your investments need to cover the loan after tax.
Read more → CALCULATORSee when your home loan could be fully converted to deductible debt.
Read more → GUIDEInvesting your surplus directly compared with recycling it through a split.
Read more →
1. Arranged a loan when our small business situation made it difficult to qualify.
2. Met requirements to have funding available by a specified date.
3. Understood my needs to setup debt recycling to allow tax structuring.
4. Communicated well throughout.
I would use their services again.
Alex, Jess and the Kingfisher team were second to none and their process from start to finish was faultless. As a self-employed business owner, it can be difficult to obtain finance at the best of times. The Kingfisher team made this an easy and efficient proposition and their continued transparent and efficient communication ensured we were kept up to date at all times. Highly recommend them for your finance needs!
Alex and Jess dealt with our investment loan and provided a top tier service. They kept us up to date and communicated every step of the process making it a seamless and smooth experience! Awesome work team we will definitely be back for future loans!
Jess from Kingfisher was outstanding. I couldn't fault her communication, expertise or dedication to finding the best loan for our situation. The entire process was seamless from start to finish. We'll definitely be using Kingfisher again in the future. A top-tier organisation.
