Greg, aged 45, and Jackie, aged 44, own a home worth $600,000 and they still owe $300,000 on their mortgage. Their after-tax salaries are $3,002 and $1,571 per fortnight and their combined living expenses are $4,800 per month.
They want to pay off their home loan quickly. To achieve their goal, they have been crediting their salaries into a 100% offset account (see Strategy 3).
They also want to maintain their lifestyle when they stop working. So, their financial adviser suggests they use debt recycling to complement the wealth they are accumulating in superannuation.
They’re comfortable with a total debt equivalent to 67% of their home value (ie $400,000). Given they currently owe $300,000, they use the equity in their home to establish an interest-only investment loan of $100,000 and invest the money in Greg’s name in a managed Australian share portfolio.