skc
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- 12 August 2008
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I'm sorry TH/SKC, but that is without doubt the worst piece of advice possible... not only would it be higher cost (mingling investment with mortgage would mean money going into that account would reduce the investment balance first reducing the tax claimable amount and therefore costing me more), but it would also be SIGNIFICANTLY higher risk.
If I did just use that 30k and didn't setup the line of credit - what happens if I were to both lose that 30k and also lose my job? If that were to happen then my house would most certainly be at risk. That 30k liquidity is the essential part of this strategy, it's the safety net, it allows for a good six months breathing space if the absolute worst was to happen... I would be completely insane to put that at risk.
Let me get this straight... I said risk $30k and it's the WORST piece of advice ever. You said risk $100K and it's a f-king plan?!
When I said "ditch the LOC" I meant do not use the total of $100k. I meant play with only the amount you've managed to save up.
Losing $30k under your LOC has basically the same financial consequence as losing $30k that is currently sitting in your offset / prepayment account. Your LOC is secured against your house, if you lose that money and your job and can't pay that back, you are just as screwed. The only difference is, if you are using the buffer $30k (as you call it) without the LOC, you will need to go to your bank and refinance and/or make your mortgage interest-only for a period when you are out of work.
Since you've already got the LOC set up, you've effectively pre refinanced and negotiated the interest-only deal. So by all means draw on the LOC for $30k play money... but not $70k+$30k.
As to interest being tax deductible... you just need to move any money from offset to pay off the mortgage, then redraw it out. The interest portion on the redraw is tax deductible AFAIK provided that you are using it for investment.