Owner occupy loan product on an IP for better rates

Discussion in 'Loans & Mortgage Brokers' started by starter, 3rd Nov, 2020.

Join Australia's most dynamic and respected property investment community
Tags:
  1. starter

    starter Well-Known Member

    Joined:
    5th Sep, 2016
    Posts:
    52
    Location:
    Sydney
    Hi moving my loan to westpac and was told its okay to have my IP loan in an owner occupy product so i can get better rates. They said its a bank product type and should not have tax implications.

    Also asked my financial planner and said should be okay.

    Anyone has done this?
     
    starter, 3rd Nov, 2020
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,983
    Location:
    Australia wide
    asking tax advice to everyone except a tax adviser?

    It is true though, product type has no affect on deductibility of interest. But is it a breach of the loan agreement should be the next question.
     
    Terry_w, 3rd Nov, 2020
    #2
    Lindsay_W likes this.
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,649
    Location:
    Gold Coast (Australia Wide)
    Sounds like some broker or banker is trying a dodgy.

    Are you receiving rental income from the security property for the Westpac loan ?

    ta
    rolf
     
    Rolf Latham, 3rd Nov, 2020
    #3
    Lindsay_W likes this.
  4. BigRed

    BigRed Active Member

    Joined:
    11th Oct, 2017
    Posts:
    43
    Location:
    N/A
    What would be the outcome if the loans were fixed at the time of converting to IP? Surely a bank can't force you to break the loan.
     
    BigRed, 3rd Nov, 2020
    #4
  5. starter

    starter Well-Known Member

    Joined:
    5th Sep, 2016
    Posts:
    52
    Location:
    Sydney
    Also asked an accountant and says ato doesnt care as long as it is clearly structured as IP. I think your correct, if anything it would be breach of contract for the loan, wonder what would be the ramification?
     
    starter, 3rd Nov, 2020
    #5
  6. starter

    starter Well-Known Member

    Joined:
    5th Sep, 2016
    Posts:
    52
    Location:
    Sydney
    Yeah thats a good question as well
     
    starter, 3rd Nov, 2020
    #6
  7. starter

    starter Well-Known Member

    Joined:
    5th Sep, 2016
    Posts:
    52
    Location:
    Sydney
    Currently receiving rental income with other bank at the moment
     
    starter, 3rd Nov, 2020
    #7
  8. Lindsay_W

    Lindsay_W Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    5,058
    Location:
    QLD/Australia Wide
    Highly likely the new lender (westpac) will notice that 1) you're receiving rental income for that security property and 2) you don't live there
    So unless the banker/broker is telling lies on the loan application you won't get owner occupied product or rates.
     
    Lindsay_W, 3rd Nov, 2020
    #8
    Terry_w likes this.
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,983
    Location:
    Australia wide
    If you fixed when owner occ and moved out a day later they would stay at OO rates. But on the reversion to variable it might come to notice and you would then get investment rates.
     
    Terry_w, 3rd Nov, 2020
    #9
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,649
    Location:
    Gold Coast (Australia Wide)
    best of luck :)

    ta
    rolf
     
    Rolf Latham, 3rd Nov, 2020
    #10
  11. starter

    starter Well-Known Member

    Joined:
    5th Sep, 2016
    Posts:
    52
    Location:
    Sydney
    Yes it looks like the banker is goingbto misdeclared it as OO to give me better rates so i can refinance with them. So perhaps i can ask for written letter or something to prove that i was honest to declare it as IP but still offered a oo product
     
    starter, 4th Nov, 2020
    #11
    Lindsay_W likes this.
  12. starter

    starter Well-Known Member

    Joined:
    5th Sep, 2016
    Posts:
    52
    Location:
    Sydney
    Thanks!
     
    starter, 4th Nov, 2020
    #12
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,983
    Location:
    Australia wide
    Banker is breaking their own bank policy.
     
    Terry_w, 4th Nov, 2020
    #13
    Lindsay_W likes this.
  14. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,649
    Location:
    Gold Coast (Australia Wide)
    ack
    Thats a good ethical basis to start a new business relationship with - not.

    What else will the banker do to make the deal work :),

    How someone acts with the small stuff is often how they do the bigger stuff.

    Its a form of financial advantage by deception of the employee over the employer, and its not that uncommon due to KPI pressures forced upon staff.

    ta
    rolf
     
    Rolf Latham, 4th Nov, 2020
    #14