Macquarie loan - is it easy to change to interest only?

Hi, we bought a property in 2017 that we rent out currently, when the tenants' lease is up, we want to knock it down and rebuild it to make our family home, we have saved cash to fund the new home build, but still when we move in for a few years money will be tight and we thought we might do interest only for a few years and still save some $$. We just got the variable loan from Macquarie a few months ago, do you think they let you change to interest only easily, sorry don't know how it all works with that and what the situation is like now with interest only, any advice please?

 

Thank you, hopefully it won't be too hard as its just a new loan at 50% lvr.

 

Harder to get IO on main residence with Macquarie. Need a good reason

 

Just about all banks requires reassessment to convert from IP to IO.

Like what Terry and Rolf mentioned, going IO on PPOR is hard and generally need a good reason, telling Mac Bank " money might be tight" is probably not a very good reason.

 

Keep in mind, if the purpose of the Macquarie loan wasn't to knockdown and build a new property you may be in breach. I would be very wary of leaving the loan as is and proceeding with a knockdown and build even if you can fund it entirely with savings.

 

Why?
They would never know anyway

 

The loan contract will contain such a condition. If you proceed with a development and run short of cash or have a contract dispute with builder or a fire etc or seek extra finance you will trigger a contract breach and they could demand repayment for default. Not paying a loan is only one way you can default.

Your home insurance will NOT cover a rebuild and may mean the security value is compromised. Another trigger to the lender is when you advise the insurere the property changes... They wont allow a lender interest to be removed easil and some insurere report changes to lenders without you knowing. Lenders get upset when people harm their security value and act contrary to a contract. Some councils will seek evidence in a DA that a "interest" has consented to a DA. Council do this to cover their butt.

 

If it's me I would move in after tenant moved out, get the DA ready and KDR at the same time pay P&I and fixed for 2-3 years and pay lower OO rates. Maybe discuss with the bank?

The build only takes within 1 year in most of the cases and since LVR only 50% and own cash for the build, what can really go wrong? Assume still working and pay the 50% LVR debt and have life or income insurance ..etc

Sometimes the property without the house would even worth more than with the house attached

 

How does this work ?

No need to move in. The main residence exemption might backdate to the date when the land was held for the new dwelling (ie from the date not tenanted and ready to demo).

 

Thanks, everyone for your helpful replies, when we got the home loan a few months ago we didn't intend to knock down the house, we told the broker we wanted to add a second storey and the bank knew this, the bank gave us an extra 100k on top of our loan to put in our offset to fund the renovations with our savings. Then we had architect draw up the plans and there were issues with downstairs, the architect said we would have to also renovate the downstairs as the odd shape of downstairs meant we couldn't fit the rooms we wanted upstairs, we told her our budget, this came back from the bulders quotes as ridiculously expensive, so then we decided a knockdown rebuild would be best way to spend our money.
I'm just wondering how to move forward and will call the broker tomorrow, we can put all our cash from the offset to pay the loan amount, then apply for a home equity loan? I'm not sure what to do, hopefully the broker will sort it for us. We are only just starting to look at project homes builders, we found one we liked and they are a volume well know project home builder. Our land is valued way more than than the intended new build and I estimate our lvr at completion will be about 40%.

 

There are tax implications to that - which may not matter if you never intend to claim the interest. But it would be good, generally, to borrow for the build, especially if you will or are investing elsewhere as well.

 

Thanks Terry, we will move into the house once it's rebuilt.