First Investment Property


A young corporate couple owned a property worth $950,000 with a mortgage of $620,000.

They had $80,000 in savings and wanted to use this money towards the purchase of an investment property for $500,000.



The Broker’s first discussion centred on good debt versus bad debt. In simple terms, home loan debt is ‘bad debt’ because it is paid with personal funds (after tax has been paid) and the interest on the home loan is not tax deductible.

Investment debt is deemed to be ‘good debt’ as the interest paid on the loan is tax deductible. Given both clients incomes were in the highest tax bracket, it was important to maximise the tax benefits available to owning an investment property.

For this reason, the advice was to use the savings to pay down the home loan (bad debt) using $70,000 and to keep the additional $10,000 in an offset account linked to the home loan as a personal buffer given, they were extending themselves financially with a new property.

With the home mortgage paid down to $550,000, the clients now had $400,000 of available equity in their home.

To maximise the ‘good debt (investment loan) it is possible to borrow 100% of the Purchase price ($500,000) plus purchase costs ($30,000).

Thus, two loans were obtained:

  • Deposit loan of $130,000 secured against the home* (20% Deposit + Purchase costs)
  • Purchase loan of $400,000 secured against the new investment property (80% balance of purchase)

*Even though the deposit loan is secured against the home (which is not an investment asset) the debt is tax deductible as the purpose of the loan was for investment. It is the purpose of the funds that dictates the tax benefits, not the type of asset that secures the loan.


The Broker also explained the benefits of Interest only repayment versus Principal and Interest on the investment property loan and Stand-Alone structure versus Cross Securitised.

This information was pertinent and valuable to the clients to ensure their investment structure was optimised.

As always, the clients sought final approval from their accountant before proceeding with the lending proposal and they have continued to go from strength to strength with their portfolio.

VISION Finance Australia is one of the best run businesses I know. We have been dealing with them for several years now in building our property portfolio and the advice given has been invaluable. I could name each one of the team by name, but the strength of VISION is their teamwork. Each person has a specific area of expertise for each part of the process. Every one of them have the primary focus on “client service” with the nicest of personalities. If you are looking for an example of a well-run business which performs at the top of their game in terms of financial services, this is the firm for you. I have referred some of my friends to them and have no hesitation in writing this public commendation and recommendation. Give them a try, I assure you, you will not be disappointed!