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I think the other thing that is being forgotten is that you are only looking at the cashbond's improvement in your serviceability. In Steve's example, the 20k bond p.a. gives you roughly 138k borrowing power AS A STAND ALONE. However, the property you purchase brings rental income with it so you...

The tax deductibility is twofold. Firstly you are using the loan to buy an income producing bond and secondly because the income from the bond is allowing serviceability to purchase income-producing properties.

I HAVE A CASHBOND! I AM USING THE STRATEGY AND IT WORKS. Two years ago, my bank stamped my file "NO FURTHER ASSISTANCE AT THIS TIME". The loan officer, all of 23, said "You really should pay down your loans Mrs L - tut, tut, tut". I think I had 150k in equity available but no...