Incorrectly classifying investment loan as PPOR

Discussion in 'Investment Strategy' started by Lloyd, 3rd Dec, 2019.

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  1. Lloyd

    Lloyd Member

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    What are the risks, if any, of misclassifying my investment property loan as a ppor home loan?
     
    Lloyd, 3rd Dec, 2019
    #1
  2. Terry_w

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

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    who is doing the classifying?

    Potentially,
    - obtaining a financial benefit by deception.
    - breach of mortgage and loan agreements

    But you have to consider what would happen if you got caught.
     
    Terry_w, 3rd Dec, 2019
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  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I've seen people get caught out by the lender, here's what happens...

    * The loan is reclassified as investment.
    * Moving forward from that time, the rate increases slightly to the equivalent investment rate for that product.
     
    Peter_Tersteeg, 3rd Dec, 2019
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  4. Lloyd

    Lloyd Member

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    Thank you both. It was suggested to me by a broker friend.

    Is it illegal or can it get me in terrible with the ATO?
     
    Lloyd, 3rd Dec, 2019
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  5. Terry_w

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

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    ATO don't care what you tell a bank.
     
    Terry_w, 3rd Dec, 2019
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  6. Ummm

    Ummm Well-Known Member

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    So... basically there is no penalty, just oops sorry and start paying the investment rate. Good deterrent! I bet no one is doing this...
     
    Ummm, 3rd Dec, 2019
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  7. Terry_w

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

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    Terry_w, 3rd Dec, 2019
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  8. Terry_w

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

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    Terry_w, 3rd Dec, 2019
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  9. marmot

    marmot Well-Known Member

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    There was an article on this a month or so ago , more specifically regarding Westpac and how they suddenly realised they were a lot more exposed to investor owners than they originally thought.
    As it turned out many of the loans that they thought were for a PPOR were in fact investment properties, and they were all with the same bank.
     
    marmot, 3rd Dec, 2019
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  10. Lloyd

    Lloyd Member

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    What was the outcome?
     
    Lloyd, 3rd Dec, 2019
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  11. marmot

    marmot Well-Known Member

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    Westpac just realised they were a lot more exposed to investor owner properties than originally thought , the article did not go into any possible ramifications for dishonest customers.
     
    marmot, 3rd Dec, 2019
    #11
  12. Ummm

    Ummm Well-Known Member

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    I'm sure there is a large taskforce looking into it. 'waves at John sitting by himself in the basement of the AFP eating Doritos'
     
    Ummm, 3rd Dec, 2019
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  13. Lindsay_W

    Lindsay_W Well-Known Member

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    Why were they recommending that to you? For a slightly lower interest rate?
    If you need the rental income for serviceability purposes, for example if you're refinancing, it could create an issue for you.
     
    Lindsay_W, 3rd Dec, 2019
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  14. Lloyd

    Lloyd Member

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    Yes, I wanted to improve my cashflow.

    I'm ahead of my loans so I wanted to re-calc and get a better rate.

    Then the broker suggested misclassifying a loan on a PPOR. My gut says don't do it, but logic says, investigate.. Is the issue that you are suggesting: an impact to my credit rating?
     
    Lloyd, 3rd Dec, 2019
    #14
  15. Lindsay_W

    Lindsay_W Well-Known Member

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    Ok I see, cash flow must not be tooo bad if you're ahead on your loans :)

    It wouldn't be an issue for your credit rating, I meant that if you wanted to refinance your "PPOR" (investment) loan to another lender, and needed to show the rental income for serviceability purposes then they either wouldn't let you use the rental income for servicing (because you're claiming it's PPOR) or they would want to refinance it as an investment loan and you would get the higher rate anyway.
    Sounds like your broker friend may be just trying to get a discount with the current lender though?
     
    Lindsay_W, 3rd Dec, 2019
    #15
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