Capatalizing interest?

I currently use some of my LOC to help with mortgage payments.Only quite a small percentage of it.I just got a response from Margeret Lomes, after writing to a property magazine, who doesn't think this is a good idea.What do others think about capatilizing interest to buy time? It is a technique used by Chan and Naylor and endorsed by others that I respect but am interested in other opinions.
 
Im not going to comment as to why it is or isnt a suitable strategy, because there are a number of factors, least of which is if your accountant realises there is now a ruling in regards of capped interest.

Why was the reason for it not being a good idea in your case please ?

ta
rol
 
Margeret Lomes just thinks is a bad idea for anyone.I personally think that if I am only using a small % of my LOC to top up interest payments then I am not making it risky and simply buying more extra years of time until an upswing.



Im not going to comment as to why it is or isnt a suitable strategy, because there are a number of factors, least of which is if your accountant realises there is now a ruling in regards of capped interest.

Why was the reason for it not being a good idea in your case please ?

ta
rol
 
Thats ok.

Absolutes arent a good answer to anything in my opinion.

Im sure ML has her reasons, and they will be sound.

One area where capped interest works extremely well with no effective downside is debt recycling.

ta
rolf
 
I agree with Rolf. Cap interest can be a good strategy but is not a magic solution to allow you to ‘afford’ more property. You should use cap interest because you want to, not because you have to.
 
least of which is if your accountant realises there is now a ruling in regards of capped interest.

Hi Rolf

Not sure of this recent ruling regarding capped interest.

Will this affect one's ability to employ a debt-recycling strategy using a LOC for investment purposes only (paying all interest repayments, body corp, rates, insurance, etc on an investment property) and then deducting this LOC against rental income which is put in an offset account against PPOR?
 
Ok. All looks the same to me. So the short answer to my question is yes. Importantly, if I go ahead with this, the LOC will be strictly investment and not contaminated by personal expenses whatsoever.

I'll have to check whether I can pay expenses and interest repayments directly from the LOC or whether I need to transfer funds into an account from which they are paid. Only problem with the second scenario would be if that account was offset against my PPOR, which would constitute contamination with personal expenses I imagine. Preferably it would be interest earning rather than interest offsetting, if that makes sense.

Probably a good time for me and my situation in the current market to look at paying down debt (well, actually accumulate cash in offset) using available equity.
 
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