Never ‘Park’ money in a loan I sometimes see clients who had come into some money, perhaps from the sale of the main residence, and then temporarily deposit that money into an investment loan. Their excuses mainly being: The loan didn’t have an offset account, and/or I wanted to save interest. They will then later redraw this money and use it to purchase the owner occupied main residence. They think they can claim all the interest on the investment loan. Well, they have made a serious and costly mistake in doing what they did. Their attempt to save a few dollars in fees and interest has cost them many thousands of dollars in lost tax deductions. The two most important concepts here are: Any deposit into a loan is considered a repayment. it is a permanent repayment of the loan. Any withdrawal from a loan is a new loan because it is new borrowings.. Example Borat has an investment loan of $600,000 and cash $200,000. He has cash from the sale of his main residence and he will be settling on the new main residence within 2 months. Naturally he wants to save interest so he parks the money in the loan reducing the balance to $400,000. Borat later takes the $200,000 out and uses it on his new main residence. but doing this he has really paid down investment debt and borrowed to buy a private asset creating a non deductible loan. In the process he has cost himself a fortune - approx $10,000 per year in deductions for as long as he owns the investment property. The loss of tax deductions is not Borat’s only problem as he has created a mixed purpose loan too. Tip - Never pay any money into an investment loan. Use an offset account attached. if your loan product doesn’t allow for an offset account then either change products or use a savings account.