Loan purpose

[Max]

Hello,

If you borrow for a PPOR leveraged at 95% then at a later date move out and tenant the property, what are your obligations as far as the lender is concerned? Is it necessary to then take out mortgage insurance?

Also, once you have moved out and the house is tenanted, am I correct to assume the interest on the borrowed money is then tax deductible?

thanks

 

[Rolf Latham]

HI Max

You would already have paid for Mortgage Insurance at the time of settling the PPOR loan.

Once the PPOR is available for rent the interest should be deductible.

ta

rolf

 

[Max]

Thanks Rolf,

I was under the impression that you could borrow up to 95% with some lenders and not incur MI as long as the place was owner occupied. Is this incorrect?

thanks

 

[Rolf Latham]

Nope

LMI is usually payable regardless of PPOR or IP

Ta

Rolf

 

[Lotana]

I've got a related question. When you originally borrow to by your PPOR the loan is regulated by the Consumer Credit Code. When the purpose of the loan changes to IP (after you moved out and made the place available for rent) should you inform the lender? Does the loan change to "unregulated"?

Say cheese

Lotana

 

[paulzag]

I think the Consumer Credit Code still applies as the original purpose of the loan (and hence it's regulation by the act) was consumer in nature.

In order to waive your rights under the CCC you need independant legal advice. Seems unlikely for a bank to enforce that.

Paul Zag
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