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Live in Investment Property: Mortgage, Tax....

Discussion in 'Property Finance' started by ABlondie, 20th Nov, 2015.

  1. ABlondie

    ABlondie New Member

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    Hi everyone,

    I am a newbie and just signed a contract to buy a property and i need your advise urgently. Here are some backgrounds:

    - Loan: Investment Property - so we can afford the property (Interest is higher)
    - Deposit 10%.
    - We now want to live in it and still keep it as Investment Property with the Bank, and will not have any income from the property.
    - We won't be claiming any expenses or Negative Gearing from it at all.

    Now here are our concerns:

    1. Would we have any problems with Tax Office ATO? eg. paying extra Tax...?

    2. Would the bank care and find out that we are actually live in it? And does it affect our Mortgage?

    3. What does it take to change it to "Owner Occupied" Mortgage later with the same/other Lenders?

    4. When buying Home & Content Insurance, we will put it as "Owner Occupied", when making claims, would Insurer find out that it's an Investment Property and decline the claim?

    5. When selling the property, would we have to pay Capital Gains Tax even we live in it the whole time?

    I am sorry for asking many question. This is our first home and we couldn't seem to finds full answers to these.

    Any advice, explanation will be greatly appreciated.

    Thank you very much.
     
  2. wylie

    wylie Moderator Staff Member

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    Do you want to call it an investment property so you can say you will be getting rent, which helps boost your income so you can afford the house?
     
  3. ABlondie

    ABlondie New Member

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    Thanks for your response. At first we want to rent it out, but now we would like to live in it.
     
  4. York

    York Finance Broker Business Member

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    Yes but @wylie means did you have to use the rent as income to boost your total income in order to get the loan approved or is your normal income enough for the loan?
     
  5. ABlondie

    ABlondie New Member

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    Yes, even though we have the capacity to repay the loan (and interest), we need the rental income to boost our borrowing power.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1. No
    2. Yes, this is fraud basically. Breach of the terms of your agreement the lender could refuse to settle or if you settle they could call the loan in. Very unlikely they would do this I think.
    3. With some lenders it would be a new application. with other lenders just a form.
    4. read the policy closely
    5. Probably not.
     
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  7. The Y-man

    The Y-man Moderator Staff Member

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    Why bother? PPOR loan is easier to get and cheaper.

    The Y-man
     
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  8. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    The banks would generally prefer you call it a owner occupied loan too....
    So as long as you can service it....
     
  9. Greyghost

    Greyghost Well-Known Member

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    If they do not service without the rental income then as per Terry's post could be fraud.
     
  10. Greyghost

    Greyghost Well-Known Member

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    If you settle on the property under an investment scenario, I assume as per my previous post that you cannot service (per the banks calcs) without the rental income.

    If you settle on it under an investment loan, to me the biggest cost will be the additional stamp duty on it being an investment rather than a PPR..

    I have heard of members calling up the banks and telling them an IP loan is now a PPR and the bank reducing the rate. But as for change of circumstances before the property had even settled.. I'm hesitant to comment on that..
     
  11. ABlondie

    ABlondie New Member

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    I would imagine this is not a rare situation as people started the loan as Investment and then later decide to move in.
    The question is, if we are happy to keep to loan as Investment and pay higher interest rate but going to live in it for a period of time, given the fact that we can service the loan, would the bank find out and trouble us?
    We might just live in that Investment property for a few years then change it to Owner Occupied loan, when we have enough cash!
     
  12. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Assuming NSW, there shouldnt be additional stamp duty for IP over PPR.
     
  13. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    I"d pose the hypothetical question to the bank... they may actually prefer you declare it as a PPoR loan.... good for the bank, and good for you too.
     
  14. JohnPropChat

    JohnPropChat Well-Known Member

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    Not to hijack the thread but how about the opposite. Take a OO loan and once settled, the buyer has a change of heart and then rents it out?
     
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  15. sumterrence

    sumterrence Well-Known Member

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    To keep you on the legal side, why don't you rent it out for 3 months and then move in?
     
  16. Marg4000

    Marg4000 Well-Known Member

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    This would be an account keeping nightmare as CGT would be payable on sale, even though only a small amount.
    Marg.
     
  17. sumterrence

    sumterrence Well-Known Member

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    Yes, but in her case I believe the focus is to settle the property first as she already signed contract, and her broker/banker has told her that she cannot service the loan on her income and that she need the extra rental income to support it. So I guess she didn't really have any options.