If you're an investor in rental property, take a note of these common problem areas the ATO finds with deduction claims. Legal fees are only deductible if they're associated with taking out a loan to buy property - not for the actual purchase. These fees can be claimed along with other borrowing costs but not in the year of purchase. They must be depreciated over the life of the loan. Another deduction scrutinised by the Tax Office is depreciation, relatively easy to calculate for new properties but harder for established homes. Investors may try to determine these on their own but can pay a quantity surveyor to do it. This usually costs at least $500 but often results in a higher depreciation claim. The other area targeted in ATO audits is travel expenses associated with rental properties. Travel claims are allowed for the investor to do repairs, collect rent or carry out inspections. The property does not have to be interstate. A yearly per-kilometre claim can be made no matter where the property is.

A redraw facility allows you to make additional repayments on your mortgage, and then have access to the additional repayments if you need to. However, the facility is normally only available on "Standard Variable" loans, which are more expensive than basic variable loans. Before you choose the more expensive loan, make sure you understand the conditions attached to the redraw facility as it may include a minimum amount and a fee every time you use it.

A portable home loan allows you to sell one property and move to a new one without having to refinance, ie. pay out the old loan and take out a new one. This saves application and legal fees. Most lenders will insist that the loan amount required for the new property is no greater than the existing amount borrowed.

The more flexible the loan, the higher interest you'll pay. A variable loan which allows you to draw against repayments or offset savings against the mortgage will have a higher rate than a basic loan. Always compare loans with the same features when looking for the best interest rate.

There are claims that more than 50 percent of home loan statements contain calculation errors. Simple mistakes, like the entry of the incorrect balance or the application of the wrong interest rate at the wrong time can be costly and mostly favour the lender. We all make mistakes, even bank computers make them and that's why borrowers should keep a close eye on loan statements. Various software for your home PC is available that can run a check on your statements.

Many banks now charge monthly or annual administration fees on home loans. When comparing the cost of different loans, don't just look at the interest rate, look at the 'total cost of borrowing'. Many lenders are using 'average annual percentage rates' (AAPRs) as a means of comparing the true or total cost of loans. Although this measure incorporates fees as well as the interest rate, they can be misleading because an AAPR will vary on a particular loan depending on the amount borrowed.

Home owners and property investors would be wise to adopt greater financial caution amid uncertainty in the outlook for property prices and interest rates. Continued growth in household debt, easy lending practices, top-heavy house prices and the upturn in the interest cycle make a case for protecting yourself against the increasing chances of a property downturn. In the current climate, there are number of simple steps that both prospective buyers and existing borrowers can take to avoid their investment being put at risk:

If the banks, building societies and credit unions won't lend to you because you're self employed, newly arrived in the country or have a poor credit history, consider the booming non-conforming and "low doc" loan market. A number of non-bank lenders offer loans which especially cater for this type of borrower. The interest rates on non-conforming loans are generally higher but come down after a few years of on-time repayments.

Attractive when interest rates are rising, fixed-rate loans also lock you in for a fixed term and as such are less flexible than variable-rate loans. You may not be able to make additional repayments or pay the loan out early without facing high penalty charges. Fixed rate loans suit borrowers who really value the certainty of knowing exactly what their future repayments will be - property investors and borrowers on a tight budget, for example.

Home lenders entice borrowers to their home loans with attractive low introductory rates. These rates may be up to 2 percentage points below the standard rates for home loans and look therefore look very attractive. But these "honeymoon rates" only last for six months to a year before automatically reverting to the standard rate offered by that lender. By all means take advantage of these discounted rates but don't let them dictate your choice of loan. It is far more important to compare loans by felxibility of features and the standard rate that you will face for years into the future. The 'comparison rate' that lenders must publish for each loan is a much better tool with which to compare the true interest and fees costs of different loans.