Reason for not using funds for deposit?


I am considering buying a 2nd IP. I will be using equity on IP1 as a deposit. I also have the required $12000 in cash savings for Legal/Govt costs.

I have contacted my bank and they advised that as the property being purchased is an investment I would be better off borrowing the full amount and not to use my $12000.

What is the reason for this?

Maximise the deductible debt.

If you own a PPOR then the savings would be better left in an offset account against any mortgage. If you don't yet own a PPOR then perhaps you could keep the savings for one.

But many investors keep their savings for nondeductible purposes such as a PPOR.