They are cross securitising you and taking you to the cleaners. I would move onto another banker or find a decent broker.

Did you pay LMI with your PPOR purchase? Is the valuation a bank ordered valuation or your valuation?

You can have separate loan accounts without the need of a LOC. Some will suggest LOC and some will suggested a standard variable with a linked offset. 

Good idea to have all income income the rent, salary, etc going into offset against the PPOR.

High level plan looks ok. 

If it were in NSW I could give you some guidance but vic is out of scope for me.

If I were you I would talk to Oscar from here www.completedevelopment.com.au

What is the state and what is the council?

I recently had a client get DA for 2 detached dwellings on a 280sqm block in eastern suburbs syd. She will clear at least $800 profit. Purchase price of $1.5mil and DA fees of $150k.

Good town planner and understanding of planning requirements is a must. 

Contact a town planner – like this guy:

http://www.aaronsice.com.au

You do not need to cross securitise. Either pay for the offset or just have the loan sitting in redraw. Just make sure its a separate loan account and you are not contaminating deductible loans. 

There is a misconception that some banks give better valuation or some valuation companies give better vals than others. This is incorrect. Valuations come down to the specific valuer of that organization doing the valuation for that specific lender.

Here is how I would approach it – order a modelled estimate via ANZ (system chooses this but theyare quite common) and concurrently order a few upfront valuations with a few of the other lenders. Just make sure that they are different valuers. Then assess you will give you the highest amount of equity. This should dictate what you do to a certain extend.

Depends on the age and servicing but more so the lender. Most lenders will look at your age and servicing and then determine that you need to start paying the principle down.

In another scenario – if the loan is an investment loan and its with Westpac then they have a no age policy so as long as you can service the loan you do not need to pay the principle down. Their thought process is that as this is not the applicant's PPOR and its an IP – they can sell the property anytime thus no need to go on P and I repayments.

If after 10 years time the property goes into negative equity (then you have bigger problems) but seriously the bank doesn't look at it that way. It comes down to age and servicing. 

Some lenders like Suncorp, St George and Macquarie allows you to easy create sub accounts. 

If we are talking about a loan amount of $595k  then Westpac will do 4.97% (plus $1,000 cashback), CBA will do 4.95%, Homeside (NAB) will do 4.94%. 

Second tiers lenders will even go lower but again don't focus on rate – focus on who will give you the most equity.

If you are with ANZ try doing a modelled val first.

What is the purchase price and what is the State?