I have and investment property and am declaring deductions for the interest on loans for the property.
I currently have advance payments on my bank mortgage which has an interest rate of 2.19% and I have also borrowed $100k from a family member at 2.5%.
Am I obliged to pay the 2.5% loan of first? or can I simply deduct the interest I pay against my tax?
Hi @The_B
A similar question has been asked by another member of our Community. You can check out the conversation here:
Borrowing money from family to buy property tax deductibility/shares
As mentioned by @TaxedoMask, we also suggest you make sure the family loan is in line with market rates. While we can't provide a definitive answer on whether 2.5% is a reasonable rate, it sounds like it currently is.
There are no tax rules that require you to pay off the family or higher interest loan first. Where there are two loans for one investment property, which one you pay off first depends on the terms and conditions of each loan.
If the property is being rented out or is genuinely available for rent, you can claim a deduction for the interest charged on both loans. If either loan has been partly used for private purposes, the interest charged on those portions can't be claimed.
Go to our website for more information about interest expenses.
15 Apr 2026 · 4 min read time
15 Apr 2026 · 8 min read time
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