Smaller Loan with less in Offset or Larger Loan with more in Offset?

Hi all,

I'm looking for some words of advice on my strategy for buying my first home.

After looking for several months, I've finally managed to purchase an old Queenslander for 650k under the FHB scheme with a 5% deposit and no LMI. After all the fees, I will have ~95k left in my savings. My mortgage broker has gotten back to me with two possible arrangements for the loan:

• Loan A: 560k loan @ 5.75% p.a. and a 85% LVR w/ offset account - requiring me to spend $90k towards the house and leave $5k in the offset account. Plan to deposit ~$1200 per month into offset.
• Loan B: 600k loan @ 5.8% p.a. and a 92% LVR w/ offset account - requiring me to spend $50k towards the house and leave $45k in the offset account. Plan to deposit ~$900 per month into offset.

Note that I do expect to do renovations over the next few years on the house - the money I save up from my income will go into the offset to use as reno money (when needed) after the monthly repayments are done.

I am planning on making this my PPOR for AT LEAST the next 1-2 years and reassessing my situation to see if I am able to refinance and rent it out, In order to do that I will need to be have an 80% LVR or less to avoid LMI. I expect the property to increase in value by at least 6% p.a., anything more is a bonus.

With Loan A, I am able get away with paying ~$300 per month less in repayments while adding that savings into my offset (~$1200 per month). However I start off with 40k less in the offset from the get-go. I also have earlier opportunity to refinance with a reduced LVR <80% based on property value growth.

With Loan B, I have greater repayments per month but start off with $45k in the offset and deposit ~$900 per month. As this is my first big purchase, I'm quite scared about asking for an additional $40k from the bank on top of having a greater LVR to juggle. Although, from research on this sub and asking around, it seems that the norm is to always borrow your max so later on you're able to use that as a down payment for your next PPOR.

After using Figura - I found that based on the above information and a fixed rate, I'd be saving ~$5k in total interest charged and ~$9k in total repayments made using Loan A.

This is of course assuming that my salary doesn't increase, I don't rent out the place (I'm not really sure how I would model that on the website but I assume repayments wouldn't change too much) and I don't withdraw from the offset account during the repayment period.

Which option do you guys think would be a better strategy here? Thanks all for your help!!