Owner Occupier to Investor on Fixed Rate Home Loan

megabytez on 10/07/2023 - 11:40
Last edited 10/07/2023 - 11:41

Hello everyone

I would like to get some words of wisdom from fellow Ozbargainers here :)

I currently live in an Owner Occupier apartment, which is on a 5-year fixed interest rate of 1.94% (refinanced during COVID-19) and the term is due to end in 2-3 years time.

Situation: I got a job offer which requires me to relocate interstate, so I am thinking of renting out my apartment. I have been told that, for transparency, I should tell my bank that I am turning my apartment into investment property, which may involve refinancing if the bank chooses to. Obviously my current rate is very good and I don't want to lose that, and maybe I could use the 6-year CGT rule to say that I am still an owner occupier for tax purposes.

Just wondering if anyone has been in the same situation and what did you do?

Should I tell the bank that I am renting my property out?

Thank you!

Poll Options

  • 2
    Yes, tell them I am moving out long-term
  • 1
    Yes, tell them I am going away for a 1-year assignment
  • 43
    Don't tell them hehehe
Financial Home Loan

Comments

  • SnowDragon on 10/07/2023 - 11:51
    +1

    Screw them - stay on the fixed rate. All they want to do is make money and don't really care who is living in a property as long as the loan is being serviced.
    When the fixed term is up you can ease your conscience and refinance to investment loan.

    Also you can tell the ATO it's an investment property and make all the deductions you'd like. AFAIK banks send data to the ATO, not the other way around.

    and maybe I could use the 6-year CGT rule to say that I am still an owner occupier for tax purposes.

    This one is a bit harder to pull off. If you rent out your property privately you could potentially get away with it but I wouldn't try it. When your tenants start updating their electoral information to be your property I'm sure some flags would be raised.

    • itsDANNY on 10/07/2023 - 11:59

      If the banks send data to the ATO, wouldn't they know it's not an investment loan? As such I'd be very wary of making improper deductions and incurring a penalty and being flagged for potential future audits. Note I'm not a lawyer or tax agent and this is not advice.

  • ihbh on 10/07/2023 - 12:00

    Nada.

  • Iwantthebestprice on 10/07/2023 - 12:01
    +6

    Do not tell the bank
    Do not, not tell the ATO.

  • iforgotmysocks on 10/07/2023 - 12:13
    +2

    Hi it’s me, the bank.

    Thanks for the heads up

  • Porker on 10/07/2023 - 12:13
    +1

    I doubt the ATO (only raised as it was mentioned in other replies) will go find you for having your investment loan as a owner-occupied loan - they would just review whatever finances you claim/deduct against the property during tax return time. The ATO won't go check to see if your bank rate matches the property type - there are any number of reasons why an (for example) interest rate deduction doesn't match the bank rate.

    The aspect of type of loan would be issue for the bank. However, I suspect they won't mind if you keep the current situation.

    It really comes down to - once you move out, will you continue to pay the current repayments to the bank? Presumably it's currently Principal and Interest repayments. If you inform that you wish to change to investment loan, then typically it's Interest Only in which case the interest rate will be higher.

    So if you can service the current repayments and pay for the new place, then I'd say don't say anything.

    I'm only basing above off of my experiences with loans, property investments and tax items.

  • Drakesy on 10/07/2023 - 12:23

    I don't think the Bank's going to be your issue,

    It'll be the ATO when you're making money that you''ll have to declare. The bank may however have a policy/your insurance may have a policy as part of the loan that will be null and void if you don't update the bank on your circumstances (this would be my biggest worry). Also not informing the bank would likely allow to them to reneg your home loan and a possible black mark against your name - increasing future interest rates as you'd be considered higher risk.

    Yes you can take the gamble, but i personally wouldn't.
    I guess you could keep it all off the books and lease it to a friend?

    • freefall101 on 10/07/2023 - 14:03

      It's unlikely OP has insurance through their bank, but even if they do just switch insurer. The insurer won't care what the loan terms are, they're insuring the property, not the loan.

      The bank definitely won't reneg the home loan unless it's not being paid, it's a headache for them (and looks bad on the news). At worst, they find out and OP switches the loan to owner occupied. The only risk then is if it's a 90% LVR or something and not applicable for an investment loan.

  • Meho2026 on 10/07/2023 - 12:32
    +3

    Dont tell the bank anything.
    Declare all your investment property income with the ATO. Its completely irrelevant to the ATO what kind of loan you are on and there is no communication between a home loan lender and the ATO.
    If the bank ever ask you (they wont), tell them you are temporarily working away, the property is your PPR and it is your intention to move back into the property in 2 weeks.

  • Gnilgorf on 10/07/2023 - 12:35
    +1

    Similar situation.

    Purchased apartment to live in, later moved in with my now wife, put my apartment up for rent about 2 years ago.

    Just prior to renting it out, I also went and refinanced the apartment, so at that stage I was still an 'owner occupier'. Talking to the bank's lending agent at the time, I was open about shortly renting it out as I was about to move in with my partner. The agent didn't care…As long as I was paying the mortgage back without any issues then they couldn't care less. Bank gave me the Owner Occupier rate and its been that way ever since. Also heard other anecdotal experiences where they're nearly going on a decade with no effect.

    ATO / Tax wise i've still declared any income / deductions from the rental. And SRO hasn't sent me any land tax bill as it's my only rental and doesn't trigger land tax yet due to the land value being so low.

    Note that SRO has actually audited me too, but that was in relation to the First Home Owner Grant & renting the spare room shortly after purchasing. But thats all sorted and cleared~

  • dogboy on 10/07/2023 - 13:43
    -1

    Don't tell them and stay on it as long as you can. They will find out eventually though and make you change plans.

    • dogboy on 10/07/2023 - 15:24
      -1

      This is what happened to me anyway. lol@ moron downvoters. People are so stupid.

  • payless69 on 10/07/2023 - 13:49

    Ask our Gerry, he will find a dodgy way!

  • Wilson Heroes HL on 10/07/2023 - 14:19
    +1

    Your rates are fixed so even if you told the bank what you're plans were the bank can't force you to break it.

    Most likely they will just leave it on what you currently on.

  • megabytez on 12/07/2023 - 14:43

    Thank you all for your responses!

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