Concerns about OO loan for IP

I am stuck between a rock and a hard place right now and do not know what to do, so hoping someone with a bit more experience can help me.

My wife and I have already put 10% down for an apartment off the plan that is due to settle later this year. Her cousin is a mortgage broker and has been sorting out a loan for us. She told me we should go for an OO loan, even though it is an IP - something her cousin is aware of. The first set of forms he sent back to us to sign had the OO box ticked. I replied and advised we needed it changed to reflect the fact that we will not be living in the property and it is an IP. He sent a new form back still with the OO box ticked, and my wife told me not to worry as no one checks and it is not a big deal.

I am of course, genuinely concerned, as from what I understand, this constitutes occupancy fraud. My wife has told me we have to go with it, as apparently her cousin advised that all the banks don’t want to provide a loan to us, only one and only as OO and we cannot get an IP loan unless we go for another bank at a ridiculously high rate (~$600k loan with combined income of > $250k p.a.)

So, I am wondering firstly, how common is this sort of thing? Do people really lie about this all the time and get away with it? Or if/when they get caught, do they then have fraud on the permanent record? Plus, I would have thought the fact that having the loan based on an IP would be possible if OO was, due to the fact that there would be rental income, therefore a greater ability to repay the loan. I am totally against lying on the application, but feel backed into a corner now and just want to gain a more thorough understanding of what is really going on, as I am kind of feeling that I am not getting all the information.

 

A lot more common than you might think. I think if you get caught they just change it over to investment rates, I do not anticipate you ending up in jail... If you really don't want to do it then don't do it, interest rates are pretty good at the moment so the saving is not as much as it used to be.

 

The last bit is a key issue, you need ALL the information.
I think you need to ask the broker WHY it needs to be OO loan - is it due to serviceability (borrowing capacity) or something else? You need to understand the reason they are suggesting this and it's completely Ok to ask them to spell it out for you until you understand the reason in full.
Do you own a property already or are you renting? Without knowing your full financial position (no need to post that here btw) the only possible thing I can think of is your rental expense kills the deal from a serviceability point of view but some of that should be countered by the rental income and negative gearing on servicing calcs if buying it as an investment.
Is the cousin an experienced broker?
What lender have they recommended?

 

You are the one signing the legal document.
Keep asking questions until you fully understand the whole situation.