I think it depends.
If you were earning $500k, and could pay down the loans turning it to positive, is it so bad?
If you were earning $500k, and could pay down the loans turning it to positive, is it so bad?
By paying off loan you wear the opportunity cost of not using that money somewhere else.
Positive gearing; say net 7% return on 100% mortgage (after rates, insurance, maintenance but before interest expense), borrowing at 6% locked in for 5 years. You get a 1% carry on total value of property, e.g 300k property, sees 3k profit from zero $ invested (21k net income less 18k interest), essentially an infinite return on equity (ignoring the fact that equity to secure loan needs to exist somewhere else and that essentially some of this equity is 'used up' by the loan, i.e can not be used for additonal lending).
Pay off 50k, 21k net income less 15k interest = $6k profit, or 12% return on equity invested, still much better than a term deposit.
Pay off full 300k and you lose the advantage of the leverage and the 1% carry, so return on equity converges to the net 7%.
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