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A mixed loan is a loan that has been used for more than 2 uses. An example is someone who has borrowed to buy a house paying extra off the loan and then using the redraw facility to borrow money to use as a deposit on an investment property.

Mixed loans should be avoided in situations like this as every deposit into the loan will reduce the deductible debt as well as the non-deductible debt. This will cause more tax to be payable.

It is also impossible to offset one portion of a mixed loan, so an offset account attached to a mixed loan could lead to deductible interest being reduced which leads to loss of tax savings.

If you have a mixed loan with some of the borrowed money having been used to invest, you would need to apportion the interest and working this out will become increasingly difficult the more that is paid into the loan and redrawn again. It is best to avoid in most cases.

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