Turning a Mortgage Into a Wealth-Building Engine: How Mark & Lisa Used Debt Recycling
Location: Melbourne
Client Profiles:
- Mark (44) – Senior IT Consultant
- Lisa (42) – Marketing Director
- Household Income: $420,000
Goal:
Pay off their mortgage faster while building a passive income stream for early retirement.
🔍 The Challenge
Mark and Lisa purchased their family home in 2019 for $1.6 million. With a remaining mortgage balance of $980,000, they were already ahead with repayments — but wanted their money to work harder.
They didn’t want to wait until the mortgage was gone before investing. The challenge? Find a way to reduce their loan while building long-term wealth, without compromising their lifestyle.
💼 Our Solution: Debt Recycling
We introduced a debt recycling strategy – a structure designed to reduce non-deductible home loan debt and simultaneously invest in income-producing assets.
Here’s how we helped:
Loan Split & Restructure
- $800,000 retained as their owner-occupied (non-deductible) mortgage
- $180,000 restructured as an investment loan (deductible)
Strategic Investment
The $180,000 investment loan was used to build a diversified portfolio focused on long-term growth.Smart Cash Flow
Their salaries were directed into an offset account linked to the non-deductible loan.
Investment income and tax refunds were redirected to reduce the home loan even faster.Recycling in Action
As the owner-occupied loan decreased, they reborrowed the same amount under the investment facility and expanded their portfolio.
📈 The Results (After 18 Months)
- ✅ Reduced non-deductible mortgage by $75,000
- ✅ Investment portfolio value: ~$210,000
- ✅ Increased tax-deductible interest
- ✅ On track to pay off their home loan 8–10 years sooner
- ✅ Created a growing passive income stream for the future
🤔 Why This Worked
Mark and Lisa had the right foundations:
- A strong, consistent income
- Discipline with budgeting and repayments
- A long-term investment mindset
- The right financial, mortgage, and tax advice
📌 Final Thought
Debt recycling isn’t for everyone — but for high-income professionals like Mark and Lisa, it offered a powerful way to build wealth while managing their biggest debt.