Debt Recycling Calculator
Debt recycling is a strategy to convert your home loan into investment debt. Put simply, you make additional payments into your home loan, then redraw those repayments as a separate tax-deductible investment loan and invest. Over time, investment income (and the tax benefits of negative gearing) help accelerate your home loan repayments while you build a portfolio. These additional lump sum payments to your home loan are redrawn (usually annually) and invested. ‘Bad’ debt is recycled into ‘good’ debt over time.
Use this debt recycling calculator to understand how debt recycling works and to calculate the long term benefits of employing this strategy. Model how long before you will be debt free, and compare the benefits of this strategy with simply paying down your home loan.
Not sure how debt recycling works? Read the full guide →
Your assumptions
Property & Home Loan
Monthly Repayment
Investment Assumptions
Tax & Projection Settings
Net Wealth Over Time
When will I be debt free?
This compares how much you still owe on your home loan under Strategy A against how much surplus you’d have if you sold your investments, paid capital gains tax, and cleared all debts under Strategy B. When the dark bar turns positive, you’re debt free.
*“Debt Free Position” - if you sold your investment portfolio in that year and paid CGT (including 50% CGT discount), would you have enough cash to pay off both your home loan and your investment loan?
Year-by-Year Comparison
| Year | Home loan (A) Non-deductible | Net wealth (A) Total assets − debt | Home loan (B) Non-deductible | Investment loan (B) Deductible | Portfolio value (B) Investments | Net wealth (B) Total assets − debt | Am I debt free (B)? After CGT, would I be debt free? |
|---|---|---|---|---|---|---|---|
| 1 | $584,525 | $392,475 | $555,036 | $29,465 | $31,500 | $393,999 | -$553,293 |
| 2 | $568,097 | $436,713 | $539,838 | $43,573 | $48,787 | $440,186 | -$535,369 |
| 3 | $550,657 | $482,797 | $525,184 | $57,545 | $67,184 | $487,909 | -$516,914 |
| 4 | $532,144 | $530,814 | $510,272 | $70,567 | $85,930 | $538,049 | -$497,076 |
| 5 | $512,490 | $580,856 | $495,030 | $83,379 | $105,884 | $590,821 | -$475,676 |
| 6 | $491,627 | $633,020 | $479,479 | $95,985 | $127,182 | $646,365 | -$452,613 |
| 7 | $469,479 | $687,408 | $463,642 | $108,285 | $149,870 | $704,831 | -$427,779 |
| 8 | $445,967 | $744,126 | $447,547 | $120,166 | $173,993 | $766,374 | -$401,058 |
| 9 | $421,007 | $803,288 | $431,234 | $131,497 | $199,592 | $831,157 | -$372,331 |
| 10 | $394,511 | $865,013 | $414,749 | $142,127 | $226,700 | $899,350 | -$341,472 |
| 11 | $366,384 | $929,427 | $398,149 | $151,879 | $255,345 | $971,128 | -$308,351 |
| 12 | $336,524 | $996,661 | $381,505 | $160,549 | $285,542 | $1,046,673 | -$272,832 |
| 13 | $304,826 | $1,066,854 | $364,900 | $167,904 | $317,296 | $1,126,172 | -$234,774 |
| 14 | $271,176 | $1,140,155 | $348,435 | $173,672 | $350,596 | $1,209,820 | -$194,033 |
| 15 | $235,454 | $1,216,716 | $332,231 | $177,541 | $385,413 | $1,297,812 | -$150,459 |
| 16 | $197,533 | $1,296,702 | $316,429 | $179,155 | $421,699 | $1,390,351 | -$103,901 |
| 17 | $157,277 | $1,380,286 | $301,196 | $178,101 | $459,376 | $1,487,641 | -$54,204 |
| 18 | $114,543 | $1,467,647 | $286,731 | $173,910 | $498,338 | $1,589,887 | -$1,212 |
| 19 | $69,177 | $1,558,979 | $273,263 | $166,041 | $538,444 | $1,697,296 | $55,232 |
| 20 | $21,459 | $1,654,041 | $261,061 | $153,876 | $579,508 | $1,810,072 | $115,281 |
How this calculator works
- How repayments are allocated: We treat the home loan and investment loan as two splits under one facility:
- The total monthly repayment remains static throughout the projection.
- The monthly repayment is first allocated to the investment loan as a minimum repayment, then the balance is paid into the home loan.
- The following year’s income from investments (after tax, plus any negative gearing benefit) is then paid into the home loan.
- Timing of redraws: We model debt recycling annually. At the end of each year we check how much the home loan actually fell, above the minimum repayments. At the start of the next year we assume you redraw that amount as a new tax-deductible investment loan and invest it.
- Investment returns: We split total return into:
- Cash yield % p.a. (distributions/dividends actually paid to you),
- Capital growth % p.a. (price growth).
- After-tax cashflow to home loan: Annually we:
- Calculate cash distributions on the portfolio based on its balance at the start of that year.
- Add franking credits based on the % input and gross that up as assessable income.
- Subtract the year’s investment loan interest as a tax-deductible expense. If interest exceeds income, that creates a tax loss (negative gearing).
- Apply your marginal tax rate (including Medicare levy). The result can be a refund or amount payable.
- Final cash applied to the home loan = distributions +/- any tax refund / payable.
- We assume that you direct 100% of that after-tax investment income as additional repayments to your non-deductible home loan split over the following 12 months.
- “When will I be debt free?”: For each year we calculate if you sold your entire investment portfolio at that year-end value, paid CGT (with a 50% discount) at your marginal tax rate (incl Medicare levy), would you have enough cash to repay your home loan and investment loan? We maintain a running cost base that increases every time new money is added to the portfolio.
- Interest rates: We assume both the home loan and investment loan interest rates remain constant for the full projection. Both are modelled as principal & interest, not interest-only.
This calculator is general information only. It does not consider your personal objectives, financial situation, or needs. Speak to a qualified tax professional before implementing.