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

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.

 

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

 

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.

 

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?

 

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.

 

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.

 

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.

 

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.

 

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?

 

I'd suggest you keep a diary and make notes of your intentions, as part of good practice.

 

Broker suggesting you make a false declaration on the application.... you signing contracts stating same... what could possibly go wrong...

 

No - there'd be no extra commission by putting it as OO rather than IP.

 

I think they call it "financial fraud".

 

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.

 

Agree. I was pretty annoyed due to the delays. I was ready to walk. Made it pretty clear I was unhappy.