I have been told that there are lenders offering long term LOC's e.g. 25 years. In light of this can the following be done and is there any benefit? Instead of using P & I and Offset accounts or a redraw facility, how about having 2 LOC's attached to your PPOR, one for non-deductible debt and one for deductible debt. All your salary and other incomes ( e.g. Rental income, dividends, etc. ) goes into the non-deductible LOC and is drawn out when needed to pay any committments. This has the same effect as an offset account and the debt is never paid down.
Hi Dion

That could work but seems to be counter productive for two reasons.

1. You would need Tax deductible debt to start with. Most people dont have that when they have a PPOR, and if you reduce the debt to save personal interest then you are back to sterilising your personal debt.

2. Parking salary rents etc should be against PERSONAL debt not against investment debt. Investment debt is tax deductible so you are giving the tax man a free lunch.

3. Dont get too obsessed with Interest Only on a PPOR debt. A typical 30 year Sydney/ Melbourne mortgage with a P&I loan will not put a big dent into the principal unless you are parking heaps and heaps in the offset acct. But of course much depends on the overall situation.

4. It would appear people rearrange their financial affairs evry 3 to 5 years anyway, and certainly when they buy their next IP. This makes a long term I/O debt for a PPOR a less useful beast anyway.