Difference between investment home loans and home loans

[gldsaucer]

My broker set my loan up as an investment homeloan. Iam not sure what are the differences between investment homeloans and homeloans.

The reason she sets me up with investment homeloans is so that I could borrow more. I will be living in the property after settlement. She mentioned that it is easy to switch from investment homeloans to homeloans after settlement.

I will also need to pay more stamp duty for investment homeloan. She mentioned that I could claim to state revenue office that I decided to use the property as ppor after settlement then be refunded for the difference of stamp duty for ppor amd investment.

Is it ok for me to declare to state revenue office that it will be my ppor and still keep my loan structure as an investment loan with the bank?

Does this sounds dodgy or normal practice?

 

[Aaron_C]

It's the same thing. Just that usually investment loans are home loans that are interest-only.

Re the SRO - what loan structure you have with the bank is of no business to the SRO...

 

[gldsaucer]

If it is the same thing, why would an investment homeloan allows you to borrow more compared to homeloans? Their structures are the same as far as I could see.

 

[Aaron_C]

If it is the same thing, why would an investment homeloan allows you to borrow more compared to homeloans? Their structures are the same as far as I could see.

It is because with an investment property you are receiving rental income...so that means you can borrow more.

 

[gldsaucer]

It is because with an investment property you are receiving rental income...so that means you can borrow more.

Thanks for your reply. In my case I will be living in the property with the same forwarding address. Will the bank make an issue of this?

 

[Aaron_C]

Thanks for your reply. In my case I will be living in the property with the same forwarding address. Will the bank make an issue of this?

The bank doesn't care about how you arrange your tax affairs with the ATO or the SRO. That is why people run into trouble all the time...but your broker should be able to give you some advice in this matter.

 

[Terryw]

My broker set my loan up as an investment homeloan. Iam not sure what are the differences between investment homeloans and homeloans.

The reason she sets me up with investment homeloans is so that I could borrow more. I will be living in the property after settlement. She mentioned that it is easy to switch from investment homeloans to homeloans after settlement.

I will also need to pay more stamp duty for investment homeloan. She mentioned that I could claim to state revenue office that I decided to use the property as ppor after settlement then be refunded for the difference of stamp duty for ppor amd investment.

Is it ok for me to declare to state revenue office that it will be my ppor and still keep my loan structure as an investment loan with the bank?

Does this sounds dodgy or normal practice?

So your broker is encouraging you to lie to the bank so you can borrow more?

 

[Aaron_C]

So your broker is encouraging you to lie to the bank so you can borrow more?

Maybe he changed his mind Terry.

 

[Rolf Latham]

Thanks for your reply. In my case I will be living in the property with the same forwarding address. Will the bank make an issue of this?

Probably not while all is going well.

Should you run into arrears or need a financial hardship provision, you may find this more difficult to obtain.

ta

rolf

 

[gldsaucer]

So your broker is encouraging you to lie to the bank so you can borrow more?

Not really. Its just which option is best. The property will be used as an investment anyway in the near future. Its just that I will be living in there for the next 6-12 months.

I have more than enough deposit to set up my loan as a normal homeloan if I need to. However this would mean that I would not be able to borrow upto 80%.

She mentioned that The process is faster and easier for the bank to sell an investment property compared to ppor when default because there is no emotional attachment between the vendor and investment property. Banks could sell it within 6months default whereas it will take the bank longer if it is a ppor. Is this true?

Sorry folks I am just trying to convince myself that I have chosen the right broker.

 

[Aaron_C]

Not really. Its just which option is best. The property will be used as an investment anyway in the near future. Its just that I will be living in there for the next 6-12 months. I have more than enough deposit to set up my loan as a normal homeloan if I need to.

Technically it will be a breach of your agreement with the lender. But as rolf pointed out as long as you meet the repayments they won't care.

 

[Terryw]

Not really. Its just which option is best. The property will be used as an investment anyway in the near future. Its just that I will be living in there for the next 6-12 months. I have more than enough deposit to set up my loan as a normal homeloan if I need to.

In that case the lender should be able to take into account the potential rent. I don't think you would be breaching the loan agreement. Most the loan agreements that I have read have a condition that the mortgagee's permission is required to rent out a property, but as long as it is a standard residential tenancy then that permission is granted automatically.

 

[Rolf Latham]

She mentioned that The process is faster and easier for the bank to sell an investment property compared to ppor when default because there is no emotional attachment between the vendor and investment property. Banks could sell it within 6months default whereas it will take the bank longer if it is a ppor. Is this true?

Not since the NCCP.....................

ta
rolf

 

[gldsaucer]

Not since the NCCP.....................

ta
rolf

Care to elaborate on nccp?

 

[Rolf Latham]

Legislation that was brought in by Federal Gov to clean up the lending industry to ensure that only the "right" people get loans

That legislation made investment and PPOR loans equal in the way they are regulated

ta

rolf

 

[Bradsdad]

OK, I'm really confused here.

It's set up as an Investment loan so you can borrow more. Is this due to the fact the lender will only do 90% on a PPOR but 95% on an IP? Or because rental income is required to meet servicing? Maybe even the lender won't do IO on a PPOR?

Either way both seem dodgy to say the least. If it is neither then I can't see the need or the "easier later on" approach. If you but later on another PPOR and rent this one out the rental will be taken into account.
If it's the IO reason I'd be surprised that a lender wouldn't given the short term goal.

 

[Bigtone]

i cant see the problem here at all.

Loan is set up investment to include rental, purchaser intends to live in for a maximum 6-12 months of the 30 year loan term and then it reverts to investment property and everything is as it should be.

ATO and SRO don't care about loan name or type just want you to play by their rules and nothing here is outside those rules.

Saucer has enough funds in savings to cover no rent while he lives in the property.

He wanted the property, has now secured it and will meet all ATO and SRO requirements and can clearly make the repayments. He told the bank it is an investment property and will be for the vast vast majority of the loan term.

A lot of huffing and puffing over nothing.