How to Change from Investment Loan to Owner Occupied

Switching your property’s loan status from an investment loan to an owner-occupied loan can be a smart financial move. Whether you are planning to move into your investment property or have already done so, converting your loan can potentially save you money with lower interest rates and better loan terms. In this blog, we'll guide you through the steps to make this transition smoothly and effectively.

Can I change investment property to primary residence?

Moving from an investment loan to an owner-occupied one involves financial considerations. This shift entails converting a property initially purchased for investment purposes into a primary residence. The process necessitates careful assessment of loan terms, tax implications, and lender requirements. While the transition can offer potential benefits such as lower interest rates and favorable lending terms, it demands a comprehensive understanding of the mortgage landscape. This article delves into the strategic steps and intricacies involved in changing the status of a loan, equipping borrowers with insights to navigate this transformation effectively.

Benefits of Switching to Owner Occupied Loan

Lower Interest Rates

One of the main advantages of switching from an investment loan to an owner-occupied loan is the potential for lower interest rates. Lenders typically offer better rates for owner-occupied properties because they are considered less risky.

Better Loan Terms

Owner-occupied loans often come with more flexible terms. This can include features such as the ability to make extra repayments without penalties, access to offset accounts, and lower fees.

Easier Loan Management

With lower interest rates and more favorable terms, managing your loan becomes easier. This can lead to better cash flow and the ability to pay off your loan faster.

Steps to Change from Investment Loan to Owner Occupied

1. Assess Your Current Loan

Before making any changes, review the terms and conditions of your current investment loan. Check the interest rate, remaining balance, and any fees associated with making changes to your loan. Understanding your current loan will help you make an informed decision.

2. Contact Your Lender

Get in touch with your current lender to discuss the possibility of switching from an investment loan to an owner-occupied loan. They will provide you with the necessary information and guide you through their specific process. Some lenders may require proof that you are now living in the property.

3. Provide Necessary Documentation

Lenders typically require documentation to verify that the property is now your primary residence. This may include utility bills, a change of address form, and other proof of residence. Make sure to gather all required documents to expedite the process.

4. Compare Loan Options

While your current lender may offer to switch your loan type, it's a good idea to compare options from other lenders. Seek out loan terms and interest rates that are competitive. You might find a better deal elsewhere, which could save you more money in the long run.

5. Apply for the Loan Change

Complete the application after deciding which loan option is best for you. This involves submitting the necessary paperwork and completing any required forms. Be prepared for a credit check and a property valuation, as these are standard procedures when changing loan types.

6. Review and Sign the New Loan Agreement

After your application is approved, carefully review the new loan agreement. Before signing, make sure you comprehend all of the terms and conditions. If everything looks good, sign the agreement to finalize the transition from an investment loan to an owner-occupied loan.

7. Update Your Financial Records

Once the switch is complete, update your financial records to reflect the change. This includes informing your accountant or financial advisor, updating your budget, and making any necessary adjustments to your financial plans.

To switch an investment loan to an owner-occupied loan, you will typically need to follow these general steps:

•  Review loan terms and conditions: Carefully examine the terms and conditions of your existing investment loan to understand any restrictions or requirements for switching to an owner-occupied loan. This may include checking if there are any penalties or fees associated with the switch.

• Contact your lender: Reach out to your lender to discuss your intention to switch the loan from an investment loan to an owner-occupied loan. They will provide you with specific guidance and requirements for the process.

• Provide updated information: The lender may require you to provide updated information, such as proof of residency, income verification, and other documentation to support the change in loan purpose. Prepare the necessary documents as requested by the lender.

• Loan application process: Depending on the lender's policies, you may need to go through a formal loan application process to switch the loan purpose. This may involve completing a new loan application and providing the required supporting documents.

• Property valuation: In some cases, the lender may require a new property valuation to determine the current market value of the property being used as security for the loan.

• Loan assessment: The lender will assess your application, including your financial situation, credit history, and the updated loan purpose. They will determine if you meet their criteria for an owner-occupied loan.

• Loan approval and terms: If your application is approved, the lender will provide you with the new loan terms and conditions, including the interest rate, repayment schedule, and any associated fees or charges. Carefully review and understand the terms before accepting the loan offer.

• Settlement and documentation: Once you accept the loan offer, you will need to complete any necessary settlement processes and sign the required loan documents. This may involve legal and administrative procedures, such as mortgage documents and loan agreements.

• Transition process: Coordinate with your lender to ensure a smooth transition from the investment loan to the owner-occupied loan. They will guide you on any required steps, such as closing the investment loan account and opening the new owner-occupied loan account.

Transitioning from an investment loan to an owner-occupied one demands thoughtful planning and informed decisions. By comprehensively evaluating financial goals, lender conditions, and potential tax consequences, borrowers can make a smooth and strategic shift. The journey involves meticulous steps, but the potential benefits, including improved loan terms and financial flexibility, make the process a rewarding endeavor for those seeking to transform their property's purpose and financial landscape.

Is it possible to convert an investment property into a primary residence?

Transforming your rental property into your primary residence requires a formal declaration for tax purposes. Essentially, you need to inform that your investment property is now your primary place of residence (PPOR). This change necessitates a clear acknowledgement of your property's altered status and its associated tax implications. Let our team of Loans and Mortgage experts guide and support you through the loan process. We pride ourselves on being the most trusted and experienced mortgage servicing company in Australia offering services in New South Wales, Victoria, Queensland, Western Australia, South Australia, and Tasmania. For more Call us on 0403 803 470.