LoC and offset - I'm slightly confused

Hi there,

Current situation:

PPOR value: $1m
Mortgage: $675 000
Offset: $400 000
Line of Credit: $0 borrowed against $50k facility
Net debt: $275 000.

Two things:
a) I want to buy lots and lots of shares
b) I may wish to turn this PPOR into an IP one day.

I would assume the best thing for me to do is:
* transfer money from offset to mortgage (making mortgage $275 000 and offset of $0)
* then apply for increase in LoC from $50k to $575k (which is 85% of PPOR value minus mortgage of $275k)
* use the $575k to buy shares.

Now that works fine - big deductible debt against shares, small non-deductible debt against PPOR - but then what happens when I convert it to IP - I then have a small deductible debt against the IP which I'm not sure is good.

Can anyone advise if this is the best way of going about things?


How much do you want to use to invest in shares? What's the timeframe here for converting to an IP?

Creating purely deductable debt is straight forward, as you suggest, mearly transfer your offset to the mortgage then redraw. This falls apart when you convert the home to an IP.

You've still got a lot of equity available, you could access the rest of the equity to 80% of the property value by increasing the LOC. If you want to borrow more to invest in shares you could also consider a margin loan facility.

You can also invest via various structures which might be very tax effective over time. Some investment vehicles are tax free after a period of time. With the right forward planning you may be able to cash in your portfolio to purchase the next property with cash, then redraw to re-invest in the share portfolio.