Beating The Lending System

Hi, Ben Kingsley here with another How to Session. This one is a little bit more of a serious How to session because I want to talk about potential fraud in regards to lending fraud.

Now we’ve seen the APRA which is the Australian Prudential Regulation Authority make some significant changes to the way in which consumers can borrow money to invest in property. Now, these changes needed to be made because the number of people who are investing in property is accelerating and is potentially putting pressure on the system. Obviously, we don’t want a collapse of the property market. So, what happens when you are then, in a position where you can’t actually afford to borrow the money that you thought you were able to afford? Well, what we’re talking about here today is, if you go in to speak to a professional mortgage broker, they will encourage you to tell half-truths or to potentially lie on your application to try and beat the lending system.

If that’s the case, you need to move on from that mortgage broker.

You know, ultimately brokers are paid for the advice that they give, but we also know that there’s always a very small percentage of brokers which may not do the right thing. Or may encourage you to actually lie on your application. Now, what are we talking about here? Well, let’s break it down.

In terms of income, you know they could potentially ask you to inflate that income, or you know, worst case scenario they could ask you to get a fraudulent pay slip which is an absolute no go. Just walk straight out of their office if they are entertaining that type of thing.

Secondly, they can also look at the number of dependents. So, if you’ve got a wife or a couple of kids who aren’t working at the moment, that will increase your level of costs or living costs, and that will reduce the amount of borrowing capacity you have. They may encourage you not to disclose the number of children you may have on that application. Again, absolutely not on.

In addition to that, they may also say, let’s not disclose the number of loans that you have. So let’s reduce that or hide some of the liabilities, whether they be credit cards, or whether they be other loans, higher purchase car loans, whatever it may be. They are trying to manipulate the application to allow you to get the funding that you need, and they may be thinking that they are doing the right thing by you, but ultimately they’re not. The reason that you may not be able to borrow that money is because your financial circumstances may not accommodate that for you over a long term.

And the final one can sometimes also be on the asset side. Where inflated figures around the total assets that you’re holding as well, which the credit assessor is also looking at.

So in these uncertain and changing times, it’s really important to deal with professional mortgage broker who have integrity and who can honestly tell you whether it’s the right thing to do or not to do. Or someone who can guide you into other ways that you may need to solve this problem. Those other ways may be if you’re going to be committed to purchase say, an off the plan, and now you can no longer get the funding because of the changes. Or maybe we need to introduce a new buyer or tenants in common. Someone who might take half of the purchase from you so you bring a family member in and invest together in that particular application.

So there are different ways which it can be done but what we don’t want to do is commit fraud by lying on those loan applications. It’s really important to understand that, and that’s why this is a bit of a serious how to message. We don’t want to see you in some kind of legal or criminal trouble. Thanks for watching.