Investment Loan Change? Here's How to Gain Control Fast

As an investor, you initially secured a mortgage for your property with the intention of renting it out. However, circumstances change, and you might be considering moving into the property yourself. The question arises: can you change your investment loan to an owner-occupied loan? Understanding the process and implications is crucial for making an informed decision that aligns with your financial goals.

Understanding Changing Loan Types

Changing an investment loan to an owner-occupied loan involves revisiting the terms under which your mortgage was originally approved. Investment loans typically have higher interest rates compared to owner-occupied loans due to the perceived risk by lenders. Transitioning to an owner-occupied loan could potentially lower your interest rate and monthly repayments, thus saving you money over time.

Current Market Information, Requirements, and Options

In 2026, the Australian property market remains dynamic, with interest rates for owner-occupied loans generally ranging between 5.99% and 7.25%, whereas investment loans tend to sit between 6.49% and 8.5%. These rates can vary significantly based on your creditworthiness, the lender, and other economic factors.

To change your loan type, lenders typically require evidence that the property will now serve as your primary residence. This may include utility bills, a change of address, or other documentation supporting your occupancy claim. Additionally, you may need to undergo a new loan assessment to confirm your eligibility for the owner-occupied rate.

Steps to Change Your Loan Type

Transitioning your loan from investment to owner-occupied involves several steps:

1. Review Your Current Loan Agreement: Understand any clauses that may affect your ability to change the loan type.
2. Prepare Necessary Documentation: Gather documents that prove the property is your primary residence, such as utility bills or a change of address form.
3. Contact Your Lender: Initiate communication with your lender to discuss the possibility of switching your loan type. They will guide you on the specific requirements and application process.
4. Submit a New Loan Application: You may need to undergo a new credit assessment to secure the owner-occupied rate. Be prepared to provide updated financial information.
5. Negotiate Terms: Discuss and negotiate the new terms with your lender to ensure they are favourable to your financial situation.
6. Finalise the Change: Once approved, sign any necessary documentation to finalise the transition.

Tips and Considerations

Changing your loan type is not a decision to be taken lightly. Here are some expert tips to consider:

• Evaluate Cost vs. Benefit: Calculate the potential savings from a lower interest rate against any fees associated with changing your loan.
• Check for Fixed-Rate Penalties: If your current loan is fixed, be aware of potential break costs for switching loan types.
• Consult a Mortgage Broker: Engaging with a mortgage broker, such as Esteb and Co, who has access to over 83 lenders, can provide you with options and negotiate better terms on your behalf.
• Long-term Plans: Consider your long-term living plans to ensure the change aligns with your future goals.

Frequently Asked Questions

• Can I change my loan type if my financial situation has changed?
  Yes, but you will need to undergo a new financial assessment to ensure you meet the eligibility criteria for an owner-occupied loan.
• Will changing my loan type affect my credit score?
  Applying for a new loan assessment can temporarily affect your credit score, but successful approval and consistent repayments can improve it over time.
• Are there any fees associated with changing my loan type?
  Yes, there may be administrative fees or penalties for breaking a fixed-rate loan. It's essential to discuss these with your lender.
• How long does the process take?
  The process can take a few weeks to several months, depending on the lender's requirements and your preparedness.
• Can I switch back to an investment loan if my situation changes again?
  Yes, but you will need to meet the lender's criteria for an investment loan and potentially undergo another loan assessment.
• Does switching loan types affect my tax situation?
  Yes, as owner-occupied properties do not offer the same tax benefits as investment properties. Consult a tax advisor for personalised advice.