I thought I'd ask my DH Mel because he's pretty good when it comes to finances and property . He said that if you were to choose option 2, make sure you have an offset account. That way when you want to rent your property out you can claim your interest as a tax deduction (I hope I'm describing it right LOL). If you just pay it off on a regular mortgage, you can't claim interest later on when you want to make it an investment property. Talk to your bank and they'll be able to explain it to you better .

Keep an eye on how much property values have gone up in the past five years in both suburbs too. It may be worthwhile choosing the area with the highest growth. Our house's value doubled in the the first five years that we owned it, so it's definitely worth researching before coming to your final decision.

Good luck!