Not Informing bank after converting PPOR to IP

I have rented out my property that used to be my PPOR. It is a variable interest loan. I haven’t told the bank that I have rented out the property and it is IP now. Are there any implications if I don’t tell the bank. I don’t want to go interest only as it will require a new loan assessment and IO rates are high + I want to slowly pay down the loan anyway. I have a variable + fixed loan with another bank for my new ppor.

related question do I need to inform the VIC state revenue office as well for land tax purpose. I have moved state and my new ppor is in QLD.

 

Your loan documents states you need to inform the bank of any changes to your loan. Butbif you do or not thats up to you, there isn't any penalties if you keep it as an OO loan.

 

Did you contract to inform them or get their permission?

 

Yes, you do.

 

Sometimes the bank works it out themselves and increases the interest rate. I had a client move out of her home and rang me complaining that NAB noticed that her address had changed and increased her rate.

 

I have changed my address and that too at a branch. Let’s see if they notice it, specially that I am now in a new state. I didn’t really read the loan contract documents in details and have to dig them to read, but as long as there is not a crime I will not inform them.

 

hmmm.

 

You're gonna have fun if land tax has to be backdated.

 

CBA regularly print two messages on loan statements
1. Insurance requirements.
2. Requirement to seek permission to change property use from owner occupied for any other purpose.

 

Do the right thing! I don't know why people think it's ok to be deceitful and dishonest.

 

Because there's money involved. Half a percent interest can amount to thousands of dollars every year. It's my observation that most people want to do the right thing, but this is often measured by the ability to comfortably afford being able to do the right thing.

Lots of people fail to inform the bank that they've moved, depsite the bank contracts stipulating that they must be informed. Even the bankers tell their clients not to inform them. Often the banks eventually figure it out and adjust the rates accordingly. I'm not aware of anyone ever being penalised by the bank or having to back pay interest.

However you should definitely be up front with the government. They will ask for back pay and they may penalise.

 

We did the same changed PPOR to investment in Vic (3 years ago) and moved to new PPOR in QLD (2 years ago) -> changed addresses as required, Bank (Westpac) advised us about 18 months later that they would be converting the OO loans to Investment loans unless we had any reason to challenge this. No penalty or backdating just a change in interest rate from a future date.
We also changed our address with the SRO however did not advise them of the change in PPOR to investment as we had incorrectly thought it was exempt or at least the SRO would work out what was due - this became a problem with backdated land tax and penalty. Mind you paying the overdue land tax in the year it became due worked out okay from a tax saving perspective. (always a positive side). They advised us of the issue 2 years after we had 1st rented the property, after our response to their questions they took 2 months to advise of the amounts due - and I think it was 6 months before it had to be paid. Luckily we did not have 3 years of Land tax to catchup on as the rental was from January.
So dont risk the SRO as this will cause you a problem.

 

Just watch out on the land tax front:

Tax Tip 8: Forgotten land Tax Tax Tip 8: Forgotten land Tax