Hi,
I'm thinking of doing debt recycling through my mortgage account to autinvest every fortnight into vanguard etf.
My question is how do I apportion the interest on the loan into deductable and non deductable interest?
Since I'm using autoinvest I'll be able to know exactly how much of the debt is becoming deductable and will know the total at the end of the financial year.
This is an example of what I would like to do.
Loan amount:$500k
Weekly repayment (P&I):$500
Extra weekly repayment:$200
Weekly redraw to autoinvest:$200
Total yearly investment:$10,400
Total yearly interest on year x: $20,000
Total principal repaid on year x: $6,000
So my thinking is that at the end of FY:
Remaining debt is: $489,600
Non-deductable debt is: $500,000-$10,400- $6,000 = $483,600
Deductable debt is: $10,400
The question is what are the proportion of interests that are deductable?
a) $10,400/$500,000 = 2.08%
b) $10,400/$489,600 = 2.12%
Am I in the right track? or completley off?
I don't want to do a split loan because I want to invest little amounts weekly rather than wait to save an invest big chunks. Also, if anyone has a better way on how to do frequent small investment and doing debt recycling too please share.
Thanks,
J
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