Principal and Interest or Interest Only Loans

This is a choice between whether you wish to have the principal loan balance reduced by making principal and interest repayments or have the loan remain at the original level borrowed by only making interest only repayments. Investors are usually advised to take an Interest Only loan, the theory being that principal reductions on an investment loan are not tax deductible, so therefore the money that forms the principal repayment could be used to further invest in another tax advantaged investment, thereby maximising your tax benefit or be utilized to make extra repayments to your owner occupied home loan.