Moving Into Your Investment Property?

If you own an investment property, you can generally move into it and make it your home.

But changing how you use the property can affect more than where you live. You may need to review:

• Your investment home loan and how your lender classifies the property
• Your interest rate and repayment structure
• Your tax deductions
• Capital gains tax (CGT)
• Your insurance
• An existing tenancy, if the property is currently rented

The important distinction is this: Moving into the property, changing the loan from investment to owner-occupied, refinancing the loan, and changing its tax treatment are related decisions, but they are not necessarily the same thing.

Before making the move, it can be worth having a mortgage broker review the loan, and an accountant or registered tax adviser review the tax implications.

---

Elevate Your Investment Game With The 360° Home Loan Assessor

• Determine the right deposit required for your next investment property
• Ensure complete transparency on additional expenses related to property investment
• Explore interest-rate options based on your situation

Get Started

What Happens To My Investment Loan If I Move Into The Property?

Your investment loan does not necessarily need to be refinanced just because you move into the property.

However, the property’s use has changed from investment to owner-occupied, so you should review your existing loan terms and ask your lender or mortgage broker what they require.

Depending on the lender and loan product, the lender may:

• Update the property’s occupancy or loan-purpose classification
• Move the loan to an owner-occupier pricing category
• Change the interest rate
• Change the required repayments
• Ask for evidence that you now live at the property
• Require a product variation or new application in some circumstances

For example, some lenders have a specific loan-category-switch process rather than requiring a full refinance.

Broker insight: Treat the occupancy change and the refinance decision separately. First, find out what your current lender will do when the property becomes your home. Then compare that outcome with the alternatives available from other lenders.

---

Do I Need To Tell My Lender If I Move Into My Investment Property?

You should check your loan agreement and notify your lender or speak with your mortgage broker when the property’s use changes.

Owner-occupied and investment lending can be priced and treated differently, and lenders may have procedures for changing the property’s loan category. Do not assume that simply continuing to make repayments means there is nothing to update.

A broker can check whether your lender:

• Requires formal notification
• Can reclassify the existing loan
• Requires evidence that the property is now your home
• Offers a different interest rate for owner-occupiers
• Requires a new application

---

Do I Need To Change My Investment Loan To An Owner-Occupier Loan?

Not necessarily through a refinance, but there are three different possibilities:

1. Your existing loan stays in place

Your lender may allow the existing facility to continue, subject to its terms and policies.

2. Your lender changes the loan category or pricing

Some lenders can update an investment loan to an owner-occupied category without replacing the entire mortgage.

3. You refinance

If your existing lender cannot provide a suitable owner-occupied option or another lender offers a better overall outcome, refinancing may be considered.

The right option depends on the lender, loan product, remaining fixed or interest-only periods, features such as offset accounts, refinancing costs and your broader borrowing plans.

---

Will My Interest Rate Change If I Move Into My Investment Property?

It can.

Investment loans and owner-occupier loans can have different pricing. If your lender agrees to reclassify the loan as owner-occupied, the applicable interest rate could change.

But don’t assume that moving in automatically gives you a lower rate.

A broker should first compare:

• Your current rate
• The lender’s available owner-occupier pricing
• Any package or product changes
• Fixed-rate break costs, if applicable
• Offset and redraw features
• Fees
• Whether a refinance would require a new serviceability assessment

The lowest advertised owner-occupier rate is not automatically the best reason to refinance.

---

Do I Have To Refinance When My Investment Property Becomes My Home?

No. A refinance is not automatically required simply because you move into an investment property.

Your existing lender may be able to change the classification or pricing of the loan.

Refinancing becomes a separate question:

Does staying with the existing lender or moving to another lender give you the better overall outcome?

Before refinancing, consider:

• The new interest rate
• Application, discharge and settlement costs
• Fixed-rate break costs
• Loan features
• Remaining loan term
• Whether you will need to pass a new serviceability assessment
• Your plans to purchase another property in the future

If you are planning to turn the property back into an investment later, tell your broker as well. The cheapest solution today may not be the most flexible structure for your longer-term plans.

---

What If My Investment Loan Is Interest-Only?

Moving into the property does not automatically mean that an existing interest-only period disappears; your lender’s rules and your loan contract will determine what happens.

Check:

• When your interest-only period expires
• Whether the lender will maintain it after changing the property’s occupancy classification
• What your repayments will become when principal-and-interest repayments begin
• Whether changing products affects your interest-only arrangement

An interest-only structure that made sense when the property generated rent may not suit your circumstances once you live there.

A broker can explain the lending implications. If your decision involves investment strategy or tax outcomes, obtain the appropriate financial or tax advice as well.

---

Do I Need To Notify The ATO When I Move Into My Investment Property?

There is an important distinction here.

You do not simply turn an investment property into a tax-exempt principal place of residence by “declaring” it to the Australian Taxation Office (ATO).

Whether a dwelling qualifies as your main residence depends on the facts and circumstances. The ATO says relevant factors can include:

• How long you live there
• Whether your family lives there
• Whether your belongings have moved there
• Where your mail is delivered
• Your electoral-roll address
• Connection of utilities
• Your intention in occupying the property

There is no single minimum period that automatically makes a property your main residence. Simply intending to live there without actually doing so is not sufficient.

Keep clear records of when the property’s use changes and speak with your accountant about how the change affects your tax position and future tax reporting.

---

What Happens To My Tax Deductions When I Move In?

When an investment property stops being used to produce rental income and becomes your private home, expenses relating to the private-use period generally cannot continue to be claimed as rental-property deductions.

The ATO specifically says deductions cannot be claimed once your intention changes and the property is used for private purposes. This can affect expenses such as loan interest, council rates, and other costs previously connected with earning rental income.

For example, expenses could need to be divided if:

• You move in partway through the financial year
• Part of the property continues to be rented
• The property was available for rent for only part of the year
• Part of the borrowing was used for another purpose

Your accountant can calculate the appropriate treatment.

Important: The Loan Label Does Not Decide The Tax Deduction

Having a loan called an “investment loan” does not, by itself, make the interest tax-deductible.

Similarly, changing the lender’s category to “owner-occupied” does not by itself determine the tax treatment.

The use of the borrowed funds and whether the property is being used to produce assessable income are important tax considerations. The ATO notes that interest deductions are affected when a property or borrowing begins to be used for private purposes.

Speak with your accountant before restructuring debt if tax deductibility is important to you.

---

What Happens To Capital Gains Tax (GCT) If I Move Into My Investment Property?

Moving into an investment property does not automatically erase the CGT consequences of the period when it was rented out.

If the property was rented before it first became your main residence, the ATO says you may be entitled to only a partial main-residence exemption when you eventually sell it. The period when the property produced rental income before you moved in remains relevant to the CGT calculation.

For example, suppose you:

• Buy a property as an investment.
• Rent it to tenants for several years.
• Later move into it and genuinely make it your home.
• Sell it several years after that.

Living there can affect the main-residence treatment for the period in which it is genuinely your home. It does not normally make the earlier rental period disappear for CGT purposes.

The actual CGT calculation can depend on matters such as ownership dates, periods of income-producing use, cost base, capital losses and eligibility for CGT concessions.

For that reason, have an accountant calculate your position rather than relying on a simple percentage estimate.

---

Does The Six-Year Rule Apply If My Property Was An Investment First?

Usually, this is where people confuse two very different situations.

The ATO’s continuing-main-residence rule, often called the six-year rule, applies where a property was first your main residence and you later moved out and used it to produce income.

The ATO specifically says you cannot apply this rule to a period before the property first becomes your main residence.

Scenario A: Home First, Investment Later

If you: Live in the property → move out → rent it.

The continuing-main-residence or six-year rule may be relevant, subject to the ATO rules and your circumstances.

Scenario B: Investment First, Home Later

If you: Rent the property to tenants → later move into it.

The six-year rule does not retroactively treat that earlier rental period as a main-residence period.

The ATO says a property rented before you moved into it may qualify for only a partial main-residence exemption, with CGT applying to the earlier income-producing period.

This distinction is one of the most important things to understand before assuming that moving into an investment property will eliminate CGT.

---

Can I Rent Out A Room After Moving Into My Investment Property?

Yes, but this can affect the property’s tax treatment.

If you live in the property while using part of it to earn rental income, expenses may need to be apportioned between private and income-producing use.

The ATO also says that using part of your home to generate rental income can result in only a partial main residence exemption for CGT purposes.

For example, this could apply if you:

• Rent out a bedroom
• Rent a granny flat
• Use part of the property for short-term accommodation
• Use a dedicated part of the property to produce assessable income

An accountant should confirm how expenses and CGT apply to your particular arrangement.

---

What If I Move Into The Property And Later Rent It Out Again?

Your loan and tax position can change again when the property returns to investment use.

From a mortgage perspective, tell your broker or lender before changing how the property is used again. Your lender may need to update the loan’s occupancy classification or pricing.

From a tax perspective, the property’s history matters.

Keep records showing:

• Purchase and settlement dates
• Dates tenants occupied the property
• The date you moved in
• The date you moved out
• Rental agreements and rental income
• Capital improvements and relevant costs
• Any periods when only part of the property was rented

If a property was your main residence before you later rented it out, the ATO’s continuing-main-residence rules may become relevant.

---

Do I Need To Change My Insurance When I Move In?

Review your insurance before moving in.

An investment property may have landlord insurance or another policy designed around a tenanted property, while a home you occupy yourself may require home-building and contents cover appropriate to owner occupation.

Insurance products differ, so tell your insurer how the property will be used and check the policy’s Product Disclosure Statement.

If your property is strata-titled, the body corporate may insure the building, but you may still need appropriate contents and other cover.

---

What If There Is Still A Tenant In The Property?

Owning the property does not mean you can immediately require the tenant to leave.

Residential tenancy rules differ between Australian states and territories. If the property is currently leased, check:

• The type and term of the tenancy
• The grounds available for ending it
• The required notice
• Applicable state or territory rules
• Any obligations relating to the tenant’s bond and final inspection

Speak with your property manager or obtain legal advice before issuing a notice.

Do not make financial plans around a particular move-in date until you understand when you can legally regain possession of the property.

---

Can I Move Into My Investment Property To Renovate It?

You can move into a property you own to renovate it once you are legally entitled to occupy it.

But moving in can change both the property’s rental status and tax treatment.

If you stop making the property available for rent and start using it privately, rental deductions may cease from that point. The ATO says deductions generally cannot continue once the owner’s intention changes to private use.

Also remember that:

A lender’s valuation or loan-purpose classification is separate from the ATO’s treatment of renovation expenses.

Speak with an accountant before assuming renovation costs or loan interest will be deductible.

---

What Should I Do Before Moving Into My Investment Property?

Before changing the property’s use, work through these steps.

1. Check Whether You Can Take Possession

If there is a tenant, confirm the tenancy-ending process and realistic move-in date with your property manager or legal adviser.

2. Review Your Existing Investment Loan

Check:

• Interest rate
• Fixed or variable status
• Interest-only period
• Offset or redraw
• Loan term
• Current lender

3. Ask How Your Lender Treats The Occupancy Change

Find out whether the lender:

• Needs to be notified
• Can switch the loan category
• Changes the interest rate
• Needs evidence of occupancy
• Requires a product change or new application

4. Compare Staying Versus Refinancing

Don’t refinance automatically.

Compare your current lender’s owner-occupier treatment with alternative loans after allowing for fees, features, break costs and future borrowing plans.

5. Speak With Your Accountant

Ask about:

• Rental deductions
• Interest deductions
• CGT
• Main-residence treatment
• Record keeping
• Renting out part of the property

6. Review Your Insurance

Tell your insurer that the property will become your home and check whether your existing cover needs to change.

7. Keep Records Of The Change

Keep evidence showing when the property stopped producing rental income and when you began living there.

Good records can become particularly important years later when you sell the property.

---

Broker Perspective: Don't Start With “Should I Refinance?”

For borrowers moving into an investment property, the better first question is usually:

“What happens to my existing loan when the property’s use changes?”

That separates three issues that are often mixed together:

• Occupancy: You are now living there.
• Loan classification: Your lender may treat the property as owner-occupied rather than investment.
• Refinancing: You replace the existing mortgage with a new loan.

Sometimes all three happen.

Sometimes only the first two happen.

And sometimes keeping the existing facility is more practical than immediately refinancing.

A mortgage broker can compare these options before you make unnecessary changes to your loan.

---

Thinking About Moving Into Your Investment Property?

Changing an investment property into your home can change the way your mortgage works.

Before refinancing, Home Loan Experts can review your existing investment loan and compare:

• How your current lender treats the occupancy change
• Whether an owner-occupier rate is available
• Whether the existing loan can simply be changed
• Whether refinancing makes financial sense
• How the change fits with your future property plans

We can help with the mortgage and lending side of the decision.

Please call us on 1300 889 743 or enquire online and one of our commercial mortgage brokers will get back to you with some options.

For tax, financial-planning or legal advice, speak with the appropriately qualified professional.