Join Australia's most dynamic and respected property investment community

Broker hinted on applying IP loan as "holiday home" loan for lower rate

Discussion in 'Accounting & Tax' started by doubletoplei, 20th Jun, 2016.

Tags:
  1. doubletoplei

    doubletoplei Well-Known Member

    Joined:
    17th Apr, 2016
    Posts:
    55
    Location:
    Geelong
    Was offered a good rate from a NAB banker for an IP loan (IP is interstate). Another broker I used before suggested she cannot beat that rate from NAB, but she's got some kind of approval from her point of contact within NAB that I can apply the loan as OO for a better rate, and the keyword is "holiday home". Not sure if she is serious on this or if she is just trying to grab a client by talking crap.

    Also, even if what she hinted is doable, are there any potential risks of declaring an interstate IP as holiday home from the taxation perspective (deduction and CGT issues)?

    Many thanks for reading.
     
  2. legallyblonde

    legallyblonde Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    685
    Location:
    TAS
    The ATO won't care if it has been obviously rented the whole time.
    But lying to the bank about the purpose of the property is illegal
     
    Daniel Taborsky and doubletoplei like this.
  3. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,409
    Location:
    33°41'24.7"S 150°55'34.3"E
    I was quite annoyed when (I think) my broker's aggregator did this recently (assuming the assessor works for the aggregator). I had specifically given my broker instructions that some splits were to be for investment purposes, yet the loan contracts arrived indicating they were for normal residential and not property/share investment purposes.

    After raising it with them, It took a week for new documents to be issued and I am subsequently still waiting for a refinance to settle.
     
  4. Simon Moore

    Simon Moore Mortgage Broker - Melbourne Business Member

    Joined:
    4th Mar, 2016
    Posts:
    220
    Location:
    Melbourne
    Personally, I wouldn't do it and if you do, get something in writing from the broker.

    What is the rate just out of interest?
     
  5. doubletoplei

    doubletoplei Well-Known Member

    Joined:
    17th Apr, 2016
    Posts:
    55
    Location:
    Geelong
    Hi legallyblonde,
    Thanks very much for your input. From what I hear through the broker, her lending manager from NAB is with her and they will let this pass. I am not fully convinced thus asking. I have told her frankly that this will be an IP. She is probably trying to get a better rate to keep me but I don't quite agree with what she proposed. I am more concerned on the taxation end, and if what she proposed can be done rather than just a trick on me.
     
  6. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,224
    Location:
    NSW
    Just bear in mind that people buy PPORs' and holiday homes with one intention in mind and due to unforeseen (at the time of purchase) circumstances, have to change the purpose of the property to something else.:rolleyes:
     
  7. doubletoplei

    doubletoplei Well-Known Member

    Joined:
    17th Apr, 2016
    Posts:
    55
    Location:
    Geelong
    Hi Simon, the rate from the NAB banker is 4.2% on a 350K IP loan with IO, with $395 annual fee. This broker suggested somewhere around 4.1% (OO holiday home) with IO, plus 0.3% rebate as an old customer and only $120 annual fee. Some value there with her offer but wouldn't worth much if there are potential risks.
     
  8. doubletoplei

    doubletoplei Well-Known Member

    Joined:
    17th Apr, 2016
    Posts:
    55
    Location:
    Geelong
    Hi Propertunity,
    Thanks for the input. I think this is exactly what her proposal is. There would be a fine line on the "unforeseen" part though.
     
  9. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,409
    Location:
    33°41'24.7"S 150°55'34.3"E
    Do brokers sometimes get different rates of commission for residential and investment lends? Whilst some might be trying to save the investor money, are others trying to pump up their commissions?
     
  10. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,224
    Location:
    NSW
    I'd suggest you keep a diary and make notes of your intentions, as part of good practice.
     
  11. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,098
    Location:
    Sydney & Adelaide
    Broker suggesting you make a false declaration on the application.... you signing contracts stating same... what could possibly go wrong...
     
    legallyblonde and pinkboy like this.
  12. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    No - there'd be no extra commission by putting it as OO rather than IP.
     
  13. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,224
    Location:
    NSW
    I think they call it "financial fraud". :p

     
    legallyblonde and doubletoplei like this.
  14. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,090
    Location:
    Melbourne, Nationwide
    The bank pays exactly the same regardless of the product or purpose. In this case the broker was simply trying to win business by offering incentives to the customer. I think this is crossing a line though.
     
  15. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,409
    Location:
    33°41'24.7"S 150°55'34.3"E
    Agree. I was pretty annoyed due to the delays. I was ready to walk. Made it pretty clear I was unhappy.