A calibrated model of debt recycling with interest costs and tax shields: viability under different fiscal regimes and jurisdictions

Key Points

• Novel framework models debt recycling strategy using home equity to finance investments for mortgage acceleration
• Analysis includes mortgage interest rates, equity-backed credit line costs, and tax shields from interest deductibility
• Model calibrated across three different fiscal jurisdictions

Implications

Provides quantitative framework for banks and mortgage lenders to assess debt recycling product viability across different tax regimes.

Action Required

Mortgage lenders should evaluate local tax treatment of interest deductibility when designing equity-backed lending products.