Can deductions be claimed on a mixed purpose loan

John has an IO loan for his PPOR - $430000. One of his offset account has 60k in saving. John sees a potential property and requires $50k towards various expenses and the initial payment of this investment property.

His bank doesn't let him split his loan without a reval, which John cannot afford as he bought at the peak of the market and his PPOR is now valued way lesser than the purchase price. John puts in 50k towards his loan and redraws it into a new offset account and purchases the said property. Sets up another offset account where the IPs rent is credited (thus offsetting his PPOR mortgage), pays out expenses for PM/maintenance and the mortgage paid to the bank which loaned him for this IP. Come tax time, and once the relevant portions are worked out (using Tax Tip 45: How to work out the Portions of a Mixed Loan) - what are the issue John should be wary of ?

Johns IO period run out next year, never being on PI, one option is to extend the IO loan period - which may or may not be possible given the current circumstances. Assuming the PPORs valuation still remains below what John paid for, what should John do ?

 

Yes he could claim the interest.
It would be easily apportioned.

He just has to unmix the loan before paying any further money into it.

 

Thanks for replying @Terry_w