Only Use Interest Only Loans To Acquire Investment Properties Another ‘basic’ concept - which some people don’t get. Where you have non deductible debt (such as a home loan, car loan etc) then you should only have interest only on investment property loans. If you have Principal and Interest loans you would diverting repayments from your home loan to the investment loan. The balance on the investment loan would be decreasing which would mean you are ending up with less deductions. At the time time your balance on the non deductible home loan would be going down at a slower rate which means you would be paying more interest. So the aim should be to pay down an owner occupied loan before you make any extra repayments into an investment property loan. However, where you have no non deductible debt it is still a good idea to only use IO loans on the investment properties. The only exception would be if you are a compulsive spender in which case it may then be better to pay off the loan rather than spending the money on things you don’t need. There are many other advantages with interest only loans Lower payments; Not reducing tax deductions; can still pay PI if and when you want; Can make lump sum deposits into the loan if and when you want. Storing excess cash in offsets attached will save same amount of interest as if paid into loan; allow a cash buffer build up; can allow you to live off cash rather than redrawing from loans - quicker retirement; Stretch you further with purchasing ability; Allow for related party loan strategies Indirectly make the interest on money used for private expenses deductible.