Converting PPoR PI 1.55% Variable loan to Investment IO

As you can see from attached home loan statement snapshot, I am currently paying 1.55% P&I on my (now) investment property since start of this year. This extremely low variable rate was most probably due to a fat finger error by bank employee when they topped up my then Owner Occupied P&I loan back in February.

I moved out of the property in July this year and it has been rented out since. To keep this low rate for as long as possible I haven’t updated my address with this bank and AusPost mail forwarding sends all bank statements and letters directly to my new address.

I thought I was the luckiest person on planet earth then I called VIC SRO today morning to update details for Land Tax as realised not telling bank is one thing but state government is a different beast altogether.

I was shocked when they told me I needn’t have called as they already knew my old house was no longer PPoR due to the fact I changed address on my drivers license!!!

so my questions are -

(Q1) Ignoring for a moment my contractual obligation to tell them about it (which I believe I can plausibly say oops forgot to do) How much time will it take for my (big4) bank to figure out this property is no longer owner occupied if I don’t tell them directly and this is the only account I have with them?

(Q2) If and when they do figure out, do I have to pay higher interest for previous months it was rented out and I still paid them at 1.55%?

(Q3) Am I better off converting this ($500k+, 25 years left) loan to Inv IO by refinancing to another lender right away or should I wait till my bank jacks up interest rate?

(Q4) I have realised this loan has been massively mixed and only ~50% of interest is tax deductible (initial indication from my accountant, exact % will be clear at tax time), Will I be better of splitting proposed IO loan into deductible and non-deductible splits once exact percentage is known in July?

 

If you refinance to investment IO your rate will probably be around 1% higher, thus the repayments may work out the same

 

Could be tomorrow, could be years.

Typically no, I've never seen them do that and it happens a lot

Depends on your situation, ie. do you have non deductible debt, ppor debt? I would check if cashflow would be much better on a new IO Inv rate vs current P&I repayment you might find the new IO repayment will be higher than the current P&I repayment.

You'll likely never see a rate that low ever again, switching to IO inv loan your rate will be up around 3% if not more.

Probably, get specific advice from your accountant

 

If you don't split you can apportion the interest.
If you do split you can loan recycle the non-deductible portion, or just pay this off independently. But there are also cash flow issues to consider too.

 

Additional Context -

(1) I do have non-deductible PPoR debt and cashflow is a concern though minor in severity for now.

(2) HSBC website says IO repayments on their “Home Value Inv Loan 2.67%” will be $1,113/month for IO term instead of ~$2,000/month I am paying currently.

 

That would mean about $800 per month you could redirect to your non-deductible debt - but with higher interest.
Get some tax advice on borrowing to pay the principal, loan shuffling etc perhaps

 

It's a no brainer then, as long as the serviceability works for the switch to IO, direct the additional cash flow towards the non-deductible debt.