Paying Down the Mortgage? Here’s the Wealth-Building Strategy Most High-Income Earners Miss
For many high-income earners, the challenge isn’t cash flow - it’s efficiency. The mortgage gets paid, surplus cash sits in offset accounts, and while income looks healthy on paper, wealth isn’t always working as hard as it could. This is where debt recycling comes in.
Debt recycling is a strategy designed to turn “bad debt” into “good debt” while building an investment portfolio for the future. For professionals and executives juggling strong incomes, mortgages, and long-term wealth goals, it can be a powerful way to accelerate financial progress.
What Is Debt Recycling?
At its core, debt recycling involves:
Paying down the mortgage on the family home (non-deductible debt).
Redrawing or using equity to invest in income, producing assets such as shares or managed funds.
Claiming tax deductions on the investment loan while building wealth outside the home.
The strategy is then repeated (“recycled”) over time as surplus income continues to reduce the home loan.
Why It Appeals to High-Income Earners
For professionals earning strong salaries, the problem often isn’t debt repayment - it’s opportunity cost. Paying off a home quickly feels safe, but it ties up capital in an asset that doesn’t generate income.
Debt recycling addresses this by:
Maximising tax efficiency - shifting non-deductible mortgage debt into tax-deductible investment debt.
Accelerating wealth creation - building an investment portfolio alongside home ownership.
Preserving lifestyle - allowing surplus cash flow to be put to work without sacrificing goals such as travel, family, or private schooling.
The Risks to Consider
Debt recycling isn’t a one-size-fits-all solution. Key risks include:
Market volatility - investments may rise and fall in value.
Discipline required - surplus income must consistently go towards debt repayment.
Borrowing capacity - not all lenders treat recycled debt structures the same.
This is why debt recycling works best for high-income earners with stable cash flow and a long-term investment horizon.
A Real-World Example
Consider a dual-income household with a $1 million home and a $500,000 mortgage. Each year, they direct surplus income towards paying down the mortgage. By recycling this debt - using equity to invest in a diversified portfolio - they reduce non-deductible debt faster, claim tax benefits, and steadily grow an investment base that supports future goals such as early retirement or children’s education.
Over a decade, the result can be substantial growth in net wealth, compared to simply paying down the home loan.
Why Advice Matters
While debt recycling can be highly effective, it requires the right structure and careful planning to balance risk, tax efficiency, and lifestyle goals. This is where the value of professional financial advice truly shines. A financial adviser can:
Tailor the strategy to unique cash flow, goals, and family needs.
Help navigate tax rules and lending policies.
Provide confidence through ongoing review and adjustments.
Take the Next Step
If earning well but unsure how to make money work harder, debt recycling could be the bridge between doing well and building real wealth.
💬 We’d love to help explore whether this strategy fits your situation.
📞 Book a free call with our team today and start building a more confident financial future.
Your Vision Financial Solutions Pty Ltd ABN 64 650 296 478 and its Advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This article has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.