Just thought I'd add some extra info for you. We did what you are planning. We actually had tenants in our house already as we were posted interstate. We borrowed 80% of the value of that house to buy this house, that we live in now. We did have to pay mortgage insurance, as we were using a loan for the deposit. We also had increased the amount of our mortgage, so only the original purchase loan amount is used to calculate our rental loss.
The only problem we have with it, is I am a SAHM, so therefore have no income (nothing to declare at tax time), so if I don't have a taxable income, I can't claim a loss against it, so we have a loss on the property, but can only claim 50% which is my DH's% of ownership of the property.
My tax man told me that apparently you have an amount of time (like 5 years or something) to rent out your property before you pay capital gains. Apparently your 2nd property will be considered your capital gains earner, so if you are planning to live in it for some time, the laws will probably have changed by the time you move out anyway .
Hope this helps you think of other questions to ask the bank or accountant...
Kylie37 + Craig 39
David 15, Angus 11,
Matilda 10 , Serena 7,
Jock 6, Bronte 4.