When it's time to renew your interest only period with bank A and they review your serviceability, you may not meet their requirements given your new loan with lender B and it may switch to principal and interest which may not be feasible from a cash flow perspective? Could something like that happen? Keen to hear peoples thoughts.
That's one of the reasons why you don't simply use lenders in order of serviceability. The whole, "order of lenders," and "using the lowest servicing lenders first," sounds good, but it's a rookie mistake. This is a problem that doesn't really get considered until a few years down the track when you want to access equity or extend and I/O term.
It's usually accessing equity that's the more important problem, not extending an I/O term.
This can become a real problem for new investors. A lot of people go hard when starting out, leveraging to 90% where they can. If you try to refinance that original mortgage in a few years to a more appropriate lender, it may mean you'll pay LMI again which can make this a very costly exercise.
The solution tends to require more forward planning than can be reasonably predicted. Over a 5 year period enough things can change (rates, policies, personal circumstances) that the best plan needs to change completely.
Often the best way to go about this is to use a reasonably generous lender in the early stages, but don't completely max them out. You then use a more moderate lender for the next few and then go back to another (but different) generous lender. At that point you'll probably find yourself going back to the first lender for another equity release.
By this point most investors who are aggressively acquiring property will likely have exceeded most LMI constraints and are going to have trouble accessing LMI. There does come a time when you need to step away from LMI and purchase on an 80% basis. Given this tends to occur when you've borrowed somewhere around $3M - $5M, it's a nice problem to have.