Owner-Occupier Loan for IP

Hi all

This may sound dumb, but have anyone (assuming high income earners who can secure loan without problems) tried to apply for owner-occupier loan from lenders to purchase an IP?

Is that even possible? And what would the consequence be, apart of lower borrowing capacity due to exclusion of rental income in debt serviceability calculation? Most importantly, will the interest of the loan still tax deductible?

Given the significantly lower rates with Owner-occupier loan cf Investor loan, I would have thought this idea to be attractive.

Any insights would be greatly appreciated.

 

Are you talking about lying to the lender about the fact of whether you live there or not?

 

You want to mislead a bank ? Loads of other ways you can lie eg false income etc.

For a long time many banks had no idea if properties were OO or IPs. APRA ripped into them. The rate differential is meant to cover the different ways bank must retain capital and this affects the cost of funding.

Wont change tax deductions...You can apply for a personal car loan and use it for buying an IP if you want.

 

Potentially a breach of contract. But you need to consider what could come out of it

 

Hi Paul,

Wouldn't want to go that extreme.

To me, lying about intentions is nothing, since plans always change. You may intend to use it as IP during loan application but change mind after settlement. But false income etc which may suggest forging documents is really over my moral limits.

So back to the questions, have anyone known if OO loan for IP is possible at all?

 

Hi Terry,

Always appreciate your insightful reply. What would the consequence be for a breach of contract?

Would the bank cancel the loan?

 

You would have to read the contracts to find out.

Highly doubt they could or would call in the loan. Probably just start charging you higher interest.

Consider the crime of 'obtaining a financial benefit by deception' too,

 

Thanks Terry. Yes Crime is the biggest picture I would consider. Definitely not going to risk myself any crime just to save a little on interest rates.

I assume the judgement on the crime would be based on the intention whether to cheat for financial benefits or to genuinely change your mind after the settlement.

Thanks for the feedback. I shall not proceed with the idea.

 

Although it may be a crime how likely would it be that you are ever charged, let alone convicted.

 

It's more common than you think, but lenders are looking into it...
Expect potential further questions to be asked if you're changing state or distance to employment/schooling etc.

 

Change your mind in 45 days...Right. So just let the lender know its now owner occupied or investor. Typically may mean two loans change...The former OO one is now investor and the investor is now OO. Maybe.

 

Yes, so what would happen after notifying the lender on change of situation? Would they force you to refinance? In my example, would they force you into higher-rate investor loan?

PS: not related to topic, but my business partner change his mind in 20 days and walk away after I set the whole business up. So changing mind is possible regardless of the timeframe.

 

No one will give advice to lie but this or similar questions have been asked and talked about a lot on this forum. You can search more, read and act at your own risk.