The saying that honesty is the best policy exists for a reason – lying can have serious consequences. Lying on your home loan application usually means providing false information and it can happen unintentionally, but it is avoidable.
In this article we’ll share the top lies that people make when applying for home loans, the potential consequences for lying and why transparency is always the best option.
Many of the lies that home loan applicants make are minor, or even accidental, but it’s important to avoid them. Frequently, they are lies by omission – in other words, neglecting to mention important details about your financial situation.
Do you have an old credit card lying around that is active but you don’t use anymore? Regardless of whether you use your credit cards or not, it’s still a requirement to declare any active cards in a home loan application.
Bear in mind that some department store cards are considered credit facilities, even if they are allegedly interest-free or you don’t use yours.
This goes with the above point in that you need to be upfront about all of your current debts. While it’s likely that a lender would pick up on you lying about your debt, concealing debts could prove to be a problem later.
Avoid concealing expenses and focus on sticking to a sensible budget in the months leading up to your home loan application.
Most lenders will require you to prove that you have genuine savings. A great way of doing this is showing regular savings put towards a deposit.
If you claim that your deposit comes from genuine savings, but it is actually composed of funds gifted to you (i.e. non-genuine savings), for example, this is considered a lie.
If you have an investment property, you need an investment home loan, not an owner-occupied loan. Owner-occupied home loans come with lower interest rates and misleading a lender about your intentions for the property could result in occupancy fraud allegations.
Another way applicants commit mortgage fraud is by falsely claiming Australian residency, for example. This might be done to avoid paying a foreign owner surcharge.
Sometimes applicants declare their annual salary package, rather than just their net take home pay. So, they might include their superannuation and benefits (e.g. a car/fuel allowance) which can make their income seem greater than it is.
In cases like this, applicants aren’t usually intending to lie, but it can result in declined applications or future difficulty paying off the loan.
Since many lenders require proof of stable, long-term employment, some borrowers may lie about their employment history or employment status.
Some applicants will neglect to mention their children or dependents. This is done to avoid having to declare the expenses related to them (e.g. childcare, school tuition etc.).
This is probably one of the more obvious categories of lies, but if you provide doctored statements and documents related to your income, identity and expenses you are committing mortgage fraud.
Calculate your borrowing power based on your income.
Yes, if you’re caught lying on a mortgage application, you could face consequences that vary depending on the nature of the lie. Even a little ‘white lie’ could severely shake up your life and home ownership status.
If the lender finds false information in your loan application, it’s very likely that your application will be rejected.
Additionally, you could be blacklisted. Lenders typically share data and information on known fraudsters, so you may find it difficult to secure a home loan from any lender.
Before you lie on your application, think about whether one lie is worth possibly doing away with your dreams of property ownership.
In the off chance that your lie escapes the attention of the lender, it could come back to haunt you later - one way or another.
Lies can slip through the cracks in the application process, but that doesn’t mean that you have got away with it. Lenders conduct audits from time to time, and if fraud is uncovered, your mortgage could be called in.
When your loan is called in, you typically have 30 days to fully repay your loan. This will likely require you to sell your property and lose your home.
Ultimately by lying, you are risking putting yourself through financial hardship. Most borrowers lie with the intention of taking out a bigger loan, but they risk biting off more than they can chew.
For example, if you don’t mention one of your debts, the lender could overestimate your borrowing power. This could lead to you being approved for a loan that you can’t afford to repay because your expenses are actually higher than you led your lender to believe.
If you struggle to meet your repayment obligations, you put more of a spotlight on yourself and your lie could come to the surface.
A guide to deposits, pre-approval, & choosing the right property.
Sometimes they can, sometimes they can’t. Comprehensive credit reporting (CCR) has made it so every credit history detail is reported in your credit file and can be analysed by lenders.
Additionally, payslips and bank statements are cross-checked, ABNs get checked, tax information gets assessed – essentially, everything is picked through with a fine-toothed comb.
So, any false information or inconsistencies are likely to be picked up at this stage. However, as mentioned above, banks and lenders may conduct audits post-settlement that can identify fraud and anomalies in borrowers.
Plus, if you are struggling to make your mortgage repayments, it’s possible that your lender will investigate your circumstances. They may find that you misrepresented your financial situation in your initial application.
Lastly, if you refinance your home loan, past lies can come to the surface. You should be careful to avoid providing false information on your home loan application when refinancing as well.
Misrepresenting personal and financial information in your home loan application is never a good idea. It’s always smarter to wait until you can actually afford to manage the loan you want than risk committing fraud.
Lendi’s Home Loan Specialists can guide you through the home loan application process. Book an appointment today to start your home loan journey.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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