@jcmleng you have summed it up really well, debt was never at a level where it dictated decisions or big enough to sway my emotions. also helps if you have a secure income stream not correlated to investment markets, which i did not. Only borrow for things that advance in value was my belief. along with all the other factors you have mentioned.

good luck

Welcome back @PhilO, hope you had a nice break.

Great point re 'double leverage'. I hadn't considered it from that perspective before.

One thing i'd add is there is an inflation hedge angle to the idea of borrowing against your home. If you expect inflation to stay sticky over the next decade (as I do), that debt actually shrinks in real terms while you’re holding assets that should (at the least) protect your purchasing power.

Another plus is a lack of margin calls too. Never a forced seller be!

Overall though it all about the 'spread'. If you can generate an after tax return that is higher than the cost of funding, it's a good move. It feels a bit cocky to say it, but I reckon that's doable for many on here. It all comes down to personal risk appetite i guess.

If you're going to do it, then do it off the back of a market crash and not as it punches new highs.

@PhilO , Happy New Year. 

I have borrowed against our home to invest in shares for almost the entire time we have had our house (20 years) and it’s been helpful, but I can’t say we have been under any significant financial stress over that time (GFC was a bit of a scare but exposure was low at the time). Interest rates have been relatively low and I have only ever borrowed less than half our “equity”.

Initially I used funds (Line of Credit), a passive approach for income generation, using the dividends and tax refunds from the deductible debt to pay down our loan on the house. Once I had done that and realised how crap the funds were I switched to direct investing – banks post GFC then in 2016 once we had paid off our home I went with MF and my own research.

The arbitrage of the returns, tax deductions and reduction in non-deductible debt was the initial attraction. I let the interest on the Line of Credit compound and focused on paying down our home loan. I also like the fact that the debt is inflated away to some extent also, you are effectively short the A$.

I would do it again now if I was just buying, but stick to index ETF’s which were not around when I started doing it. I would also make sure I had excess capacity in the Line of Credit for at least 1 year of interest payments at higher interest rates, so if things go south you can ride that out for at least a year.

To @BkrDzn 's point, timing can be important. I started small and increased as the equity grew and my portfolio matured, I made mistakes early and with small amounts and they were not big mistakes due to a low risk approach. You can step it up when there is a crash if you have the capacity, but always have a healthy margin of safety for both financial and home life security.

@BkrDzn

One of the most fortuitous moves I have ever made in investing was setting up (but not drawing down) a loan against our house in the second half of 2019. The plan was to have some firepower available, that I would only deploy in a massive crash/buying opportunity.

The bank was annoying, and it took months to get approved, but I wasn't in any particular hurry. Got everything signed off at the start of 2020.

Then of course COVID hit. Within the space of about a month I deployed the whole loan amount. One year later, that account was up by over 50%.

I actually phoned the bank around April 2020, wanting to increase the loan. I was told they had a freeze on all new loans (as did most of the other banks I believe). Pure luck that I had a loan locked in at just the right time.

The lesson for me was to always have some firepower set up in reserve. Nothing worse than having an opportunity present and not being able to take advantage fully.

The counter-argument is that, as long as you are confident that you can earn more than the interest rate on the loan, you should borrow as much as you can and stay fully invested.

I like to aim for a balanced approach, where I borrow about half of the maximum that the bank will lend me. That way I can still sleep at night if there is a crash, or I get some calls wrong. Plus I get to keep the rest of the borrowing capacity as "firepower".

I have recently begun researching this very topic as I am building my first PPOR this year. Debt recycling is a fantastic tool that not many people seem to know about and is a great wealth builder. Supposedly the interest rate for investment loans are really good (around 5.35% I've heard from others that are debt recycling). The way I will structure and attack my home loan is as follows:

• Split the loan up into smaller $100k lots, numbered 1, 2 , 3 ... etc.
• Set up an offset account to target 1 and have all forms of income go into this offset.
• Reach full offset and pay off 1.
• Debt recycle 1 and now have a $100k loan for investments.
• Invest $100k into relatively 'safe' purchases i.e. ETFs that track ASX, Nasdaq etc.
• Restart strategy and target loan '2' on PPOR
• Rinse, repeat.

By the time you've 'recycled' the full amount of your non-deductible interest payments into 'good debt', the capital on both the home and shares (should) have grown. You've also generated an income stream from the dividends, allowing for faster repayment of the other PPOR loans. Selling a portion of the shares to clear up the debt at this point may see you with a fully paid off house and half a decent portfolio!

For anyone wondering why it's setup this way, the smaller loan approach allows for a clean cut with no tax implications. It also gives a psychological boost when you can see milestones being reached and clearing non-deductible debts 'faster'.

Like @Goldfish said, having that money approved and ready to go is a well-prepared strategy that allows you to take advantage of buying opportunities. It may also be wise to leave one of the loans fully offset rather than paying it off so that you have an emergency fund available should you need it. Everyone is at different stages of course so assess what your risk appetite is and go from there.

I initially started buying ETF's with cash, then realised there was a chunk of non-tax-deductible debt available which we could use after we were lucky enough to accumulate enough cash in the offset.

Our structure:

• pay off home loan
• redraw from home loan
• 'Loan' that money to the Trust
• Trust buys and owns the investments

Benefit is we can claim the interest against the investments and allocate the trust distributions to the most tax effective person(s) in the family.

One area I sometimes struggle with is having the discipline not to continually re-draw the home loan to buy shares that are 'on sale' or that I get excited about from my learnings here. There was a point where I was investing too much and whittling down what is essentially our cash reserves leaving us a little leaner than I would like on that front.

Everyone has different risk tolerances, for me, it seems like a free kick. We have a base of general index, Blue Chip and Active Funds then I play around with individual businesses so if we ever need extra cash, then I'll liquidate something broad based with that decision based off tax or the very effective test of sticking my finger in the air to see which way the wind is blowing...

Great topic to get underway @PhilO. There's some great discussion going here.

Mines a similar setup to @Jarrahman. My wife and I bought our PPOR back in 2024. I then essentially got the debt recycling underway in mid-2025. As you would've guessed, we hadn't paid off much but, due to Perth housing prices going nuts, we already had some equity in our PPOR due to a revaluation. I decided to remortgage, use that equity via a loan split, 'pay down' the split loan and redraw that back up to it's full amount and 'loan' that to a family trust.

That capital has now been deployed largely in income-generating ETFs, with some allocated to individual stocks (need to have some fun), also with some focus on income. These pay distributions/dividends into the trust and this is then cycled into the non-deductable debt whch still sits against the PPOR loan.

Couple of things my accountant has advised me to consider:

• Ensure that you can 'prove' or justify that investments provide some form of income generation for tax purposes (makes bitcoin a difficult prospect)
• The investment loan needs to be fully put to work in order to claim tax on 100% of the loan (so if some is left to the side for a crash/rainy day then you cant claim tax on that)

Largely agree with everything above as well. Only comment re: waiting for a crash is - when is the next crash? Yes we are 'toppy' at the moment but does that mean that a crash is just around the corner? If so, how far away is the corner? You get what I'm saying...

Plan is then to check in with my mortgage broker every 12 months or so, get the place revalued, use equity into another loan split, or ratchet up the current loan split to allow for more capital to be deployed.

Took me a while to get the main boss of my life on board with this, and she's still slowly coming around to it. One way we comprimised was to ensure we have enough in the offset for rainy day/back up plans if things go sideways.

Also should note that there has been some members on here that have helped me along the way with this - always appreciative of the support I get from the Strawman Community!!

Timely post, I recently looked at an investment loan. Interest only loan at 5% (no cash back) and assuming tax deductible interest,.the break even return requirements for me is around 3.5% pa. Over a long enough horizon, say 5 years (as long as I can get the interest only) that's a bet I'm willing to take.

The main benefit for me vs an investment property is the flexibility in investment and diversification. I can choose whatever investment mix I like, direct investment in shares or ETFs vs a single investment property. Heck I could even buy REITs if I wanted. Like Australia, in my jurisdiction I am limited to what assets I can invest in to be able to get the interest deductibility (no Bitcoin!) but still a wide range. Some assets here even have no capital gains tax and I skew towards those.

@PhilO re risky being near profit inflection points, carrying debt, or with high operating leverage. One of those is not like the others. Agree on debt and partly operating leverage. volitile yes, but not necessarily risky.

Hi @Strawman great to be back and thanks for the well thought out reply. The leverage and inflation discussions are really interesting. I find the ideas start simple but quickly get complicated when you peel away a few layers. A few thoughts;

I think as capable investors, we should certainly expect high likelihood of returns of more than 9%. It’s just in a concentrated portfolio, the number of holdings (ie; sample size) is not high enough to be highly certain of it. Looking at my 18 year stock portfolio returns, which overall have been solid, a fair portion of my returns have come from a handful of decisions. If they went poorly, I could be in a significantly different place. If the debt is tax deductible, it lowers the bar a fair bit (say to a 6% rather than a 9% break even target), but still, with the type of portfolio some of us have, there is a world where just a few decisions turn out wrong and we could be in the negative. On the flip side, we could end up with 30% plus returns, if a few things go right. I think where we are in life matters a lot here. In early accumulation phase, perhaps starting from scratch, if it was to happen, isn’t that bad. For someone who financially is in the land of diminishing return however, that is able to do most of the stuff they want already with their investment income, pushing the leverage button on a concentrated portfolio may not stack up on a risk reward basis. I found the story of the forgotten Buffett and Munger partner, Craig Guerin a super interesting one. He bought the same stuff as Munger and Buffett but was wiped out due to leverage - different situation as at least part of his debt was margin loans, but relevant to the diminishing return point.

On inflation. Yes there is certainly a benefit that our home loan will be tiny in real terms eventually. I think some of this is clawed back. I’m trying to wrap my head around something. Inflation erodes the real value of the debt, but it also inflates the taxable capital gain. The tax system claws some of the benefit of the debt erosion back. I need to think through this a bit though.