Hi PM
There is more to property investing than using a deposit, or paying / not paying mortgage insurance
Some people like to buy one property, pay off the debt, redraw the money, buy another etc
Some people like to use as much of their own money as possible, other people use the least they can
Some people want to buy the whole street, others want one investment property and that's enough for them.
Explaining the mechanics of 'how' something works is important, but each investor will develop their own style and what works well for them.
There is only one opportunity to 'borrow to the max' and that is at the time of buying.
Borrowing the maximum establishes the finance base for the property for tax purposes. The original loan is the only loan relevant to that property, unless there are further borrowings later for improvement to the property.
For people on low incomes, the tax relevance is of not much concern, however people's circumstances change and they can often look back and wish that they had 'known then what they know now'.
For example, when No: 1 Son bought his first property he was working weekends at Bi-Lo. Later, he worked full time, then returned to study, then to full time work and is now overseas.
Since he bought that property he has had five quite different tax circumstances, but the borrowings arranged at time of purchase were the maximum we could do for the property - with structuring, 100%LVR plus costs.
Yes, it cost him a bit of mortgage insurance, but this has been amortised over the first five years of the loan. Without the mortgage insurance he would have missed out on establishing the historic cost base of the finance. With the left over money, he put it in an offset account and so paid reduced interest but still had access to the money.
What are the circumstances of your friend? This is what is relevant, not whether mortgage insurance will or won't be payable.
Mortgage Insurance, as it is insurance, is calculated on exposure and value of the risk. If your friend is buying low cost properties then even a high level lend may cost little to insure. If she is buying high cost properties then her dollar cost may be more but the relative cost may be low.
Saving pennies may seem like a good idea. I refinanced a 100% loan last year for customers of mine who had no money, honey, when they first contacted me but bought their first home on a wing and a prayer.
18 months later, they wanted to access the equity in the property to build a garage, and wanted to change lenders. This cost them quite a bit in break costs and in new establishment costs, and I suggested that they go to 95%LVR with the new lender but they thought about it and said that 90%LVR would be all they needed.
Two weeks ago they contacted me again and now they want to do the kitchen, however in the past 12 months values have not improved much and their lender no longer lends over 90%LVR.
PM, property investing, like life itself, is all about striking while the iron is hot.
Your friend needs to think about what she really intends doing, why she is doing it and what she hopes to achieve.
We can only deal with today, and if we want to maximise our opportunity we have to maximise it today.
Hope this helps
Kristine