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Moving to investment loan

Discussion in 'Property Finance' started by Nimble, 10th Jan, 2016.

  1. Nimble

    Nimble Well-Known Member

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    I got keys to my newly built PPOR over a month ago and now pay principle + interest on my loan. As my circumstances changed, I decided to make it an IP. I haven't lived in the house, it is currently available for rent (no takers so far).

    From what I read here and other places, loan for IP should usually be interest only. Would anyone be of different opinion? Also I called my bank (Westpac) and was told I can move to 'Rocket Investment Loan'. I had a read of it and it seems very suitable. Similar interest rate to what I am on now at 4.84%, offset account, some fees waived and I can pay interest only on my loan again. What do you guys think? Or should I find a broker to get a better deal? As this is my first IP, with hopefully a second one sometime this year, should I go fixed or variable rate, or a mix of both?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Have you claimed the fhbg?

    As you haven't lived in the house are you going be liable for cgt?
     
  3. Nimble

    Nimble Well-Known Member

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    Yes I did get FHOG but I don't believe I need to pay it back yet, as technically the house isn't an IP till tenants move in.

    I thought CGT applies to if I sell the place, or come tax time and I am positively geared?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would try to move in, especially if it is empty. if it is not your main residence initially you will pay CGT when you sell. Change the Westpac loan to Rocket Repay interest only, ask for a discount, qualify for the FHOG and then later move out and take advantage of the lower interest rates and the 6 year rule for CGT>
     
  5. Nimble

    Nimble Well-Known Member

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    Great suggestion but I moved for work reasons from Perth to Brisbane hence my PPOR is now an IP.
     
  6. Sonamic

    Sonamic Well-Known Member

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    From what you've stated it's never been a PPOR. Have Utilities been hooked up in your name, have you had your mail directed there? Circumstances do change, but I think you may have to pay back the FHOG. Going IO on the loan is a good first move though if you're converting the property to an IP.
     
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  7. Gockie

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

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    To address this question, stick with variable. Because fixed loses you flexibility if you want to refinance or pull out more money in the future (and there is a fair chance you will).
     
  8. Nimble

    Nimble Well-Known Member

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    @Sonamic Yes all the bills are in my name till tenants move in but mail goes to my Brisbane address. I do intend on paying back FHOG.

    @Gockie what about a mix of both?
     
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  9. Gockie

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

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    I've done that... problem is if your lender won't allow you to pull out money eg. Your property has gone up 70k. Yippee! You naturally want to pull out equity and buy again. But.... your lender says... nope. You dont have serviceability in their eyes... what to do??

    If you want to refinance with a more generous lender to buy the next place you will have to pay a break fee. I've done this in the past.... it can be quite painful, and can stop you moving forward with the refinance. So keep it all variable.
    Rates are low and will probably stay low for a while anyway so there's no rush to fix...
     
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  10. Nimble

    Nimble Well-Known Member

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    Thanks @Gockie, very helpful. Should I make the switch to investment loan over the phone or will I get a better deal if I set up an appointment with my bank? I could ask for a lower interest rate otherwise tell them I will move to another lender?
     
  11. Gockie

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

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    Asking for a lower interest rate on the phone can work... I've done it after I had the honeymoon period completed on an IP before and was pleasantly surprised. There's no harm in asking in any case. If you don't ask, you won't receive. I'd go in prepared with the rates on offer from other lenders though before making the call.