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Thanks Thrawn. If the costs end up being $419213 at settlement, do they drop the extra $787 in a savings account, or do they literally drawn up the loan for the exact amount of $419213?

AH you've nailed it. Makes sense when you look at it from the bank's point of view. Thanks for the clarity!

Ugh, sorry, I messed up the figures. Thanks to those who pointed out my blunder! The offset does decrease by the same amount as the PPOR loan. PPOR value $350k, loan of $150k. Offset has say, $90k. New IP purchase, value $400k. New loan, 105% IO, ie. $420k to cover purchase + costs...

I had thought along those lines but he certainly indicated that it could be claimed... said "why wouldn't you maximise your tax benefits and do it this way". And the loan is for investment purposes which is the criteria, isn't it?

Somehow in all my reading of this forum I completely missed this scenario! I was surprised when the bank's mobile lender (franchisee) said that I could move a part of the PPOR debt to a new IP loan to bring it up to 105% LVR, while keeping all properties with the bank under 80% LVR. Here's a...