House family members are living IP or OO

Discussion in 'Loans & Mortgage Brokers' started by JohnPropChat, 27th Mar, 2020.

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  1. JohnPropChat

    JohnPropChat Well-Known Member

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    For the purpose of a mortgage, is a house family members are living in an OO or an IP as there is not rent involved? Would this be considered a holiday home?
     
    JohnPropChat, 27th Mar, 2020
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  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    It's probably private use. Read tax ruling IT2167.

    No rent. no deductions

    Many think you can include a notional rent and claim deductions. No rent or legal basis for it being received means no deductions. Land tax etc. Penalties for fraud and evasion apply .. reckless 20%+
     
    Paul@PAS, 27th Mar, 2020
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Tax rulings irrelevant for loans.
    You will need to review the loan agreement to find out, it will probably say something like if the property is rented you must tell the mortgagee. But generally they will want to charge investment rates on a holiday home. Is the borrower living there? If not then prob investment rates.
     
    Terry_w, 27th Mar, 2020
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  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If the qn relates to borrowing the difference between oo and inv is likely irrelevant in this new order. Valuations will be hit hard. Equity release far harder. Income security will also impact
    Investors will face challenges like the early GFC. Far worse. This will b a credit crunch and flight to quality is the new order.
     
    Paul@PAS, 27th Mar, 2020
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I read the question as asking if owner occ rates or invest rates would apply to a property where family where living in it - but probably not the owner.
     
    Terry_w, 27th Mar, 2020
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  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If it's a val issue then that suggests pain is coming. Rate differential is so yesterday
     
    Paul@PAS, 27th Mar, 2020
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  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Nothing to do with valuations either!
     
    Terry_w, 27th Mar, 2020
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  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Nah :) very relevant

    One thing that may come home to roost for those chasing rate rate rate, rather than value

    Major lenders have announced their deferment options, many smaller RATE ONLY lenders have yet to do so I believe. Those backed by warehouse funds from Majors ( such as U bank, PLanlend, Choicelend Fastlnd) Adelaide/Bendigo backed Mortgage Managers, will be fine, but I am unsure of the real low rate 5 Star Canstar rated lenders as yet.

    I hope I am wrong, and that the gov will offer them some support.

    Im sure someone will have done the research and can put me at ease pls.

    Quality is long remembered after price is forgotten

    Loans aint Loans

    ta
    rolf
     
    Rolf Latham, 28th Mar, 2020
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  9. JohnPropChat

    JohnPropChat Well-Known Member

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    Thanks everyone. I should have been a bit more clear in my question. Purely asking from Bank's perspective.

    A friend who took a job interstate won't be coming back anytime soon. His elderly parents continue to live in this PPOR (ex-PPOR I should say since he no longer lives there). When he changed the address the Bank changed his loan to INV and started slugging him with higher rates.

    Since he is just renting at the moment and there is no rent payment from parents involved I said that he may still be eligible for OO rates and that he should reach out and talk to his Bank. Bank in question is NAB.
     
    JohnPropChat, 28th Mar, 2020
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  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The most evil bank!
     
    Terry_w, 28th Mar, 2020
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