In simple terms, debt recycling is a financial strategy that aims to convert non-deductible debt (such as a home loan for your owner-occupied property) into tax-deductible investment debt. It’s often used by property owners who want to make their money work harder over the long term, while still working towards paying off their home loan.

Debt recycling is becoming an increasingly popular strategy among Australian homeowners who are looking to grow their wealth while managing their mortgage. But what exactly is it—and how does it work?

Here’s how it generally works:
As you pay down your home loan, you build up equity. Rather than letting that equity sit unused, debt recycling allows you to borrow against it and invest those funds—typically into income-producing assets like shares or investment properties. The investment loan is often structured as interest-only and may be tax-deductible (depending on your situation), while your investment generates income that can help pay down your original home loan even faster.

Over time, the goal is to reduce your non-deductible home loan to zero, while building an investment portfolio that may generate long-term returns.

Potential Benefits of Debt Recycling
Pay off your home loan faster: Investment income or tax savings may help reduce your mortgage quicker.

Create wealth for the future: Investing regularly can build up assets outside the family home.

Improve cash flow: Tax benefits may free up more income to put toward mortgage repayments or other goals.

Use your equity proactively: Instead of waiting to finish your mortgage before investing, you can take action sooner.

Risks and Things to Consider
Debt recycling is not for everyone. It involves borrowing to invest, which carries risks. The value of your investments can go up or down, and your ability to make repayments is critical. Interest rate movements, changes in personal circumstances, and tax laws can also affect outcomes.

That’s why it’s important to get the right guidance and support before deciding if this strategy might suit you.

We’re Here to Help You Understand Your Options
At Mortgage Helpdesk, we can explain how home loan structures can support strategies like debt recycling—without giving personal financial advice. Our role is to help you understand your loan options, including features like redraw, offset, and loan splits, so you’re in the best position to make informed decisions.

We strongly encourage you to speak with your accountant or financial adviser to assess whether debt recycling is appropriate for your financial situation and long-term goals.

Want to explore how your home loan could support your investment goals?
Contact us at Mortgage Helpdesk to book a free chat. We’re here to answer your questions, explain how loan structures work, and guide you on next steps—all without pressure or jargon.