Hi Natalie,

Both options will work fine. But if you were hoping to turn more of your mortgage into tax deductible debt then it will obviously be more effective to then add the $2k a month to the mortgage to debt recycle further.

Dave

Hello,

Debt recycling can be a strategic way to manage your finances by converting non tax-deductible debt (like a home mortgage) into tax-deductible debt (such as an investment loan). This strategy can potentially enhance your financial position by allowing you to invest in income-producing assets like ETFs, while also working towards paying down your home loan.

In your scenario, you’re considering whether to auto-invest an additional $2000 per month directly into ETFs or to first deposit this amount into your non tax-deductible mortgage, and then periodically redraw it to invest once the amount becomes substantial.

Here are some considerations for both strategies:

1. Auto-Investing in ETFs:

   • Pros:
     
     • Compounding Returns: By investing regularly, you take advantage of compounding returns over time.
       
     • Dollar-Cost Averaging: Regular investments can help smooth out the purchase price of ETF units over time, potentially reducing the impact of market volatility.
       
     • Simplicity: Automatic investing is straightforward and keeps you consistently in the market.
       
   • Cons:
     
     • Market Risk: Regular investments mean you are continuously exposed to market fluctuations, which could be a concern if the market takes a downturn.
       

2. Depositing into the Mortgage and Redrawing Later:

   • Pros:
     
     • Interest Savings: By reducing your mortgage balance, you save on interest, which could outweigh the returns from immediate investments, depending on the interest rates and investment returns.
       
     • Lower Debt Levels: Initially, this strategy reduces your overall debt level faster.
       
   • Cons:
     
     • Opportunity C

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