The problem will be that if a lender looks at the contract, they'll immediately discount the value of the property by $35k and they'll lend on the actual value. This could create some interesting challenges at settlement.
And will the ATO treat the "reduced loan" as a mixed purpose loan when the time comes to make it an IP ?
The purpose at the time of borrowing could partly be to fund the property and partly to fund the repayment to yourself ???
Cheers,
Rob