Please help .....

Hi,

Please help me with this difficult issue:

I applied for a home loan with BoQ. The branch manager was very helpful and very confident with my application, kept on reassuring me that I had very good servicability (due to my strong income) and getting loans shouldn't be an issue.

I submitted all the requested documents, employment details, contracts and financial obligations, disclosed everything honestly.

I got an IP offer accepted with 14 days finance clause and 30 days settlement. He couldn't provide approval on time and said 3 extra days was needed. I asked for an extension and was granted, also settling in 45 days instead of 30 as previously offered.

The banker confirmed verbally that loan was all good and I can proceed with settlement so I did. However he kept on asking for more updated documents as requested by the verification team and I promptly provided each time then on the 30th day he dropped the bomb that the verification has picked up the fact that I'm a contractor and will likely ask for a contract extension in order to grant the loan.

Unfortunately my 6 months contract ends on the settlement day and it is not being renewed but the IP is neutrally geared hence doesn't really affect me financially plus I have a good buffer in place.

The irresponsible and unfortunate thing was he has been telling me otherwise all this time, telling me to be confident that the loan will go through as I have good servicability and can even borrow more if I like. I also applied to refinance 2 other loans over to BoQ as part of the process.

Now, settlement is only 2 weeks away and I am in a dire state. I have enough cash buffer to do a cash settlement but this money has been very long saved up for my future PPOR, so is it possible to use this to settle the current loan then once I have a new job(which should be soon) then obtain this amount as cash back from a new loan ? The question is, once this new loan gets drawn down and I recieve the cash back. Will the interest on this IP loan still be tax deductable in the eyes of the ATO ?

and if I were to put this cash back amount parked in another loan's offset account, say loanX, will any interest incurred on loanX still be tax deductable ?

Please help, I'm in such a dire situation by being too trusting of what the bank manager tells me. What shall I do ?


Many thanks

 

For future reference, never take a verbal approval as gospel - it is not worth the paper it is written on. Even written ones have a lot of "out" clauses for the lender.

See if you can get another contract for work lined up ASAP.

 

Oh gosh ...all my effort of saving all that cash up for future PPOR will be gone !!!!!
Is there anything I can do about this ? I honestly don't understand how some people can be so heartless just to get commission. He's the branch manager and store owner so should know how the processes and requirements are at their bank yet still reassured me to proceed as everything will be fine. Now I'm in such a big mess. Don't they have a duty of care to disclose to customers the risks and consequences or at least be honest instead of telling lies just to get commission ?

 

Sorry to hear your predicament. Are you saying the finance clause has lapsed and you're unconditional?

If not, pull the deal. If so, you'll have to pay cash unless you get more work. You'll be able to reborrow against the property down the track, but the interest will only be deductible once it's used to buy an IP. If you use it to buy a PPOR, not deductible.

Also, I bet you they've x-colled all your properties just to make matters worse. If you have to pay cash, I'd strongly advise not moving your current properties across to Suncorp.

 

True, as I have taken out several loans before but rarely got knocked back. I would have thought a branch manager would be more responsible in what they feed to customers., Now I feel that he has promised me the world then when crap hits the fan I am the one left holding the can. Is there anything I could do about this ?

 

You could launch an expensive legal battle, but banks have more money to spend on lawyers than you or I have.

 

Jess, he verbally confirmed with me that finance was APPROVED hence why I went unconditional. This was the 17th day after contract date and the due date for finance clause. We just didn't leave the period lapse.
13 days later I found out it in fact was still in progress so he has actually told me a lie just to keep going with the purchase. I would have pulled out if there was no finance in place. I would never imagine any lender would take 30days+ to grant unconditional loan approval ?

He has managed to get me to apply for refinance of my 2 existing IPs ...since the rates are good. Gosh looking back now I realised he has told me a lot of lies.

 

But don't they have a duty of care to advise customers of the right thing and not put them in a risky situation or at least not feed people lies just to get commission ?

He has put me in a very dire position and yes he has lied.

 

He now advises me a friend of him who is a broker can get a loan for me from wespac and settle on time in 2 weeks. Is this even possible ? I find it very hard to believe anything he tells me now after everything that has happened. I know this would not be possible at NAB.

 

Yes, they have a duty of care. Knowing this still does not help your present predicament.

 

Are you employed through your own Pty Ltd Co ?? Its common that applicants fail to disclose this and you give the lender copies of your personal tax etc but and when its identified they want the financials and tax etc for the company plus evidence of no arrears and good standing with tax debts. A great broker would have been onto that from day 1 so that there were no gaps.

Good example of the value of a experienced mortgage broker for next time.

 

Jess, my plan is to settle cash then once I have a new employment contract which should be very soon then the bank will lend me money for this investment and refund me the loan amount.
This cash amount has been saved up for many many years through a lot of blood, sweat and tears that I have had to sacrifice a lot in my life for .... to be used for future PPOR.

However will interest charged on this loan be tax deductable ? Also this IP is bought in a trust and the loan is in my name with me being the director.

 

Don't believe anything a banker says unless it is in writing.

You are lucky you have the cash to settle, as most wouldn't.
Ask your banker could they give the loan approval if you used the cash as security.

If you use the cash now and get a loan later it will cost you dearly.
Tax Tip 62: Paying Cash for a property and then getting a loan

 

Hi Paul,

No, I'm PAYG, I disclosed everything up front and he saw this right from the beginning.
Based from his experience he should have seen this coming but still pushed me to keep on borrowing, constantly saying that I have great serviceability he can't see any issues.
Now he is denying this.

No one in their right mind would go unconditional without finance approval and put themselve in this position. And I am especially very risk averse.
'

 

No the interest on the loan will not be deductible.

If the trustee of the trust will be owning the investment property it is a simple answer. You can lend the trustee the funds to complete and the trustee should be able to borrow to pay you back later with the interest deductible - if you set it up right.

It would be unusual for the loan to be in your name as director. You probably will need to give a personal guarantee though.

 

oh great idea!!! thanks Terry!!! the loan is 3 year fixed rate...and the cash is currently in my other offset accounts ...but I will get a new job very soon.

 

Hi Terry, yes they need me to give personal gurantee and I am the director of the trust that has been set up with a company structure. In this case can I lend the money to the trust to settle ? and later receive it back when the new loan draws down ?

 

Give these guys a go, lodge a formal complaint with them.

Financial Ombudsman Service