This sort of question is pretty common: Q: I am about to move out of my home and rent it out. To increase tax deductions can I just borrow up to 80% of the property? If not, can I just take out all the extra repayments I had made over the years? If not, then ‘that is stupid!’ The increasing of a loan means you are borrowing more money. Taking money out of redraw means you are borrowing more money. The interest on borrowed money is only deductible if the borrowed money is used for an investment or business purpose. So if you increase the loan the use of the extra money will determine it is deductible. Most people want to do this so they have transfer money to their new main residence and thereby pay less non-deductible interest. But the interest on this extra money borrowed will not be deductible and it will also create a mixed purpose loan. This is very logical. Plan ahead. If you could move out then ideally an IO with an offset account may be the way to go from the beginning - not easy these days on a main residence though.