Declaration of loan purpose

[poyner]

Hi all,

I'm a little worried that we may be getting ourselves in to something that we may not want to get in to here. Here is the situation:
Did some research on infochoice.com.au and found a loan company that seemed really good. They listed their max LVR as 97% +LMI (up to 100%). Had good interest rate/fees and they refund the $275 valuation fee at settlement. So we request an application form, filled it out with all our details and sent it in.
Next they sent us an 'indicative letter of offer which basically confirmed their fees charges, interest rates etc. and also indicatively approved the 97% LVR + LMI.
We had to sign this and return it with the valuation fee, copies of pay slips, contract etc.
Now they have sent us a 'conditional approval' which is only up to 95% LVR +LMI. This is not a huge deal as we are able to cover the difference but our financials are pretty good so I'm surprised and am hoping that they don't use the 97% value as a bait and switch tactic. It is still conditional on a valuation this Friday.
Here's the crux, they have also asked us to sign and return a 'declaration of loan purpose' form which basically says that we're using the loan for 'investment purposes' and that we may lose our protection under the consumer credit code. Is this normal for investment loans? Should we be concerned?

Unfortunately with a settlement date of 10 Aug I'm not sure we'll have time to change now even if we wanted to.

Anyway, just after your thoughts on this process and the declaration of loan purpose form.

Thanks,

 

[Pushka]

We had to sign this letter too. I think it means that we now also have to pay a different amount of stamp duty as it is for an investment not a PPR. I thought that at least it ensures the Tax office will allow us to write off our expenses

 

[Simon]

It is exactly the same as for all investment loans.

The UCCC covers all personal lending from home loans to pawn brokers, store finance to car loans. It is to protect the most vulnerable in society.

It doesn't apply to investment loans and will allow the lender to be a little less stringent with all their checks and balances. All normal laws apply still.

If you are not getting a PPOR loan then don't think twice about signing it. Every investor signs the same thing inc me!

 

[Gill Bates]

RE
"Here's the crux, they have also asked us to sign and return a 'declaration of loan purpose' form which basically says that we're using the loan for 'investment purposes' and that we may lose our protection under the consumer credit code. Is this normal for investment loans? Should we be concerned? "

The protection under the consumer credit code offered for PPOR is that if u fell upon hard times and have trouble making repayments , the process the bank must go thru to sell u up, is much more in the buyers favor. However this process is only invoked if the person in trouble specifically asks for it.
Example you could ask , to not have to make any payments for 3 months say ... while your financial situation improves .... A bank person will never tell you this . You need to actually quote the section of the legislation ,,,,

Section 66 of CCC deals with a bank helping a person suffering temporay financial hard ship. The ccc legislation is on the web.

I read about it years ago in a magazine to do with re investment

From
deacons.com.au/UploadedContent/NewsPDFs/News669.pdf
"Banks not helping customers who have hit hard times" (2004)
...
The Code (of Banking Practice) Compliance
Monitoring Committee (CCMC) has found that banks
are not properly assisting customers experiencing
financial difficulty....
....

Furter on mentions section 66 ...
.............requirements of the CCC (section 66). A debtor is
entitled to make a hardship application, but only where the debtor is
temporarily unable reasonably to meet repayments because of illness,
unemployment or other reasonable cause. In other
words, the obligation under the CCC only kicks in if the
debtor asks for help and only in specified circumstances.
Finally, the CCC sets out only 3 outcomes of a
successful hardship application: extending the loan term,
postponing repayment due dates, or a combination of
both. ................

notice the debtor must ASK
---------------
http://www.google.com.au/search?q=Section+66+of+ccc+site:au+bank&btnG=Search&hl=en

or

Borrowers in hardship win case against bank
http://www.wesleymission.org.au/centres/creditline/sharkwatch0203.asp#4


www.wesleymission.org.au/centres/creditline/sharkwatch0010.asp
even has a sample letter for a section 66 hardship application ...

 

[poyner]

Thanks so much for clearing up the declaration form guys. Put my mind at ease.

What's your thoughts on the drop in LVR? Also normal? As I said, I'm not actually concerned about this too much from a personal perspective but am generally interested.

 

[Peter_Tersteeg]

By taking the 95% + LMI loan, you're paying significantly less mortgage insurance than a 97% +LMI loan. The difference is almost 1%.

 

[Mofra]

Thanks so much for clearing up the declaration form guys. Put my mind at ease.

What's your thoughts on the drop in LVR? Also normal? As I said, I'm not actually concerned about this too much from a personal perspective but am generally interested.

The lender should have informed you (or your representative ie your mortgage broker) prior to this, advised the reason & confirmed this will be ok. I'd lodge a formal complaint if they have just changed it withotu consultation.