Question: Why is the cheapest interest rate not always the best for Investors?

Answer: Getting the cheapest interest rate may be ok if you only want one or two properties in your investment portfolio. If you want a multiple property portfolio then you need to use a lender that will allow you to go back and unlock equity in your other properties, for purchasing your next property without saying that you don’t have enough income to allow this.

Question: If I draw out equity from a property is it tax deductible?

Answer: The Australian Tax Office looks at what the equity(money) is being used for, rather than where it comes from. If you are using it for an income producing investment then most likely it’s tax deductible, however it’s always best to check with your accountant.

Question: Offset accounts and Redraw, aren’t they the same thing?

Answer: It depends in what context you are using them. In a scenario where you have a property that you currently reside in and you want to purchase a bigger property and move into that, whilst keeping the existing property as an investment property, they will affect the tax deductibility of the loans over the property in different ways.

Question: Why use Equipment Finance(leasing) for purchasing equipment for my business rather than Equity from my home?

Answer:  Equity from your home may be at a cheaper interest rate but it’s always important to consider your long term security. If you can’t make the repayments on an equipment loan they repossess the equipment, if you have borrowed against your home to buy the equipment and can’t make the repayments, they repossess your home. Consider also if you have borrowed against your home, these funds are not readily should you want to move somewhere else or upgrade your home.