Suppose hypothetically I had $300,000 in cash sitting in a savings account in my bank. The savings account produces interest, which is taxable.
Suppose I wanted to buy a $300,000 house in Craigieburn. Would it be a good idea to buy this house outright with the cash and not worry about any home loan or would it be better to take out another loan and use the interest from the bank savings account to pay the mortgage?
By taking out another loan I can claim the interest repayment as a deduction to reduce my taxable income. One of the problems with borrowing to reduce taxes is the debt obligation is produces. However, in this example I have $300k in a bank account produce the income needed to easily fulfill this debt obligation.