Thanks very much for the replies guys, they have been very helpful.

Gary, you have kind of confirmed what I was thinking. We are doing things the wrong way around, having the higher mortgage as our primary residence and therefore not benefiting a whole lot from the tax office on the lower mortgage. The best we could do would be to redraw the $80k odd we have in redraw and put it on the new mortgage, giving us an investment mortgage of 320k and a primary mortgage of 580k. Which would not leave us with a whole lot of room to manouevre, and would probably be only advantageous in the long term, maybe after 10 years. Until then we would be mortgaged to the hilt with a slow gain in equity on both properties. Of course increasing rental returns would help, but who knows by how much. Unfortunately staying in this unit is not really viable for longer than another year or so, due to a hopefully expanding clan.

Richard, that is an interesting idea, of course as a layman something I had not considered before! My understanding of what you are suggesting is that we retain the unit, but sell it to ourselves in a matter of speaking? That way our investment mortgage would be 440k and the primary mortgage 450k? That would make a big difference, I'll have to do some numbers on it, if I am assuming correctly.

As you guys are obviously well versed in these things can I ask your honest opinion on what you would advise me to do? Maybe we should knock the idea on the head for the next few years, get ourselves a house, try to hammer the mortgage, and then maybe in a few years pick up a unit? Although it seemed like a great idea, having a choice unit in a choice location, to hold on to it, maybe it's just not the right thing to do at the moment. Unless we somehow found a suitable 3 bedroom property for less than 500k!

Thanks again