Will this loop hole work? RE: Homeloan

Discussion in 'Loans & Mortgage Brokers' started by fullylucky, 3rd Sep, 2015.

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  1. acorn123

    acorn123 Well-Known Member

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    IMO the difference in rate between home loan and investment loan is still a new thing for banks (remember it was a challenge for Westpac to implement it ;)).
    Some buyers are exploiting loop holes. This will last for some time until banks or ATO comes up with some new rules. For example:
    1. Assuming one guy has an existing "Investment loan A", he may move into House A and refinance it into "home loan" with a lower rate (taking some photos to prove he is living in it). Once refinance completes, he moves out and rent it out. Investment loan converts to home loan.
    2. Repeat this for all existing investment loans. Might be difficult for interstate properties, and could consider play this game for holidays:D. I believe there are some creative ways around.
    3. For any new purchase, may start with a home loan, and rent it out after settlement (or live in it for some time, days/weeks? as long as getting paper work done:D).
     
  2. Sonamic

    Sonamic Well-Known Member

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    Yes it will. If you only have 1 property and it's an IP. Otherwise it's not worth doing to save .27% in interest.

    In OP's case I do believe it to be a rent by room arrangement from memory?
     
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  3. wylie

    wylie Moderator Staff Member

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    Hey Bran... By official do you mean JP? We have two living in our house right now and I think you are nearby. Let me know if you need a local JP.
     
  4. Perp

    Perp Well-Known Member

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    If you're willing to commit fraud, there are all sorts of ways to make money.
     
  5. acorn123

    acorn123 Well-Known Member

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    @Perp: No. It is not fraud - just this guy changes mind very often ......;)
    Changing mind is legal ......:D
     
  6. Perp

    Perp Well-Known Member

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    Funnily enough, the banks have thought of that! Thus there's a requirement in the loan documents that you have to notify them when the status of the security changes, from PPOR to IP or vice-versa. Failure to do so brings us back to... fraud. :)
     
  7. turk

    turk Well-Known Member

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    Not sure that the lack of notification would always meet the definition of fraud.
     
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  8. Perp

    Perp Well-Known Member

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    I meant the dictionary, not the legal definition: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".

    i.e. If you're willing to lie / breach contract / be dishonest, all sorts of avenues for making money become open to you.
     
  9. turk

    turk Well-Known Member

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    How does not notifying the bank that the security has changed from a IP to a PPOR meet either the dictionary or legal definition of fraud?
     
  10. Perp

    Perp Well-Known Member

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    If your loan documents - that you've signed - require you to notify, and you don't notify, then your actions meet both the dictionary and legal definition of fraud.
     
  11. acorn123

    acorn123 Well-Known Member

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    @turk and @Perp:
    Why is it so difficult to notify banks:rolleyes:? You have to do so when you do refinance. It's just a formality.
    This won't stop these guys to swim around:D.
     
  12. Perp

    Perp Well-Known Member

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    It's not, but then your interest rates will go up to investor rates, which defeats the point of the proposed exercise.
    I have no idea what this means.
     
  13. acorn123

    acorn123 Well-Known Member

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    @Perp: For example:
    A guy has a home (loan), lived there for some time, and then decided to rent it out.
    He notified the bank that the house is now a rental property (most people do not notify this to banks). Does the bank force him to convert the home loan to investment loan? No.
    Let alone if this guy has the home loan fixed for 5 years:D.
     
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  14. Perp

    Perp Well-Known Member

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    Oh, I see. Well, if the Bank doesn't do anything, then fine, but I'm betting they will. :)
     
  15. Angel

    Angel Well-Known Member

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    Lucky's home loan is about to be paid off anyway, so no interest to pay if he then moves out and rents it to another party.

    Mate, you need to calculate the tax payable verses the $$ saved when you move into your other property, have the loan reinstated as a owner occupier, and lose all the tax advantages that you currently get because it is rented out.

    I'm no licensed financial planner, but I think you would be better off arranging a LOC (Line of Credit) for the PPOR and buying yet another IP. I am not aware of banks increasing interest rates on LOCs so you might be onto something.

    I can see merit to moving into the share house though, as you will then be able to control the tenants better if you live there. So if I was you, I would convert the PPOR to an IP and buy a third IP at the same time. Make more $$$ than not buying another one.