If you are trying to decide whether or not to use excess cash to pay off your loan, here are a few things to consider:
If you are an owner- occupier, paying off your mortgage is reducing a debt on which the interest is not tax-deductible.
If you decide later to borrow more money to buy a new home and rent out your original home, the interest on the loan for the new property will not be tax deductible.
You also would have eliminated a debt on which interest would have been tax-deductible, once your old property was rented out.
Instead of paying off your mortgage, deposit surplus cash into an interest-offset account attached to your original mortgage.
This way, if you decide to move out of your home and rent it out, you can withdraw the cash from the offset account and use it to fund your new property purchase.
The original mortgage will still exist and the interest that you will be charged will be tax deductible.
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Friday, 17 January 2020