Thousands of home owners have fibbed to secure a home loan, but experts warn they will have trouble bearing the cost of their lies down the road.
A Finder survey shows one in eight people falsified details during the home-buying process, with 4 per cent of Australians lying about their income, 4 per cent lying about their debt, and 9 per cent lying about their savings.
Michelle May, principal of Michelle May Buyers Agents, told TND that while the findings aren’t surprising, they are worrying because people are taking on huge amounts of debt based on false information.
“I always say, ‘No property’s worth eating baked beans for the rest of your life’,” she said.
“If you’ve taken out a huge mortgage and the value of your property has come down, you could be left with negative equity, and then a property you can’t sell, and then you end up with a massive debt.”
Ms May said she frequently sees potential clients realise they can’t afford the type of property they were originally after once they’ve had a harder look at their finances and been through the home loan pre-approval process.
And home loans are only set to get more expensive, with Australians warned to brace for at least two more interest rate hikes this year.
“It is so important to understand what your budget actually is,” she said.
Running the risks
Montara Wealth and Binnari Property director David Hancock said while people are always keen to push boundaries and skirt around rules in every aspect of life, getting away with it during the home loan application process would be tricky.
Credit reports can be integral to getting approved for a home loan in Australia, and any substantial debt, such as credit cards or car loans, should show up on those reports.
When it comes to income, most banks will seek verification, and producing documents like fake payslips toes the line of fraud.
Last year, a South Australian man was found guilty of handing in fake payslips to banks on behalf of clients to help them secure home loans, receiving a suspended jail sentence of four years and nine months.
In 2017, a Melbourne-based mortgage broker pled guilty to conspiring to defraud financial institutions by $170 million through falsified documents for home loan applications, and received a five-year jail sentence.
Most Australians wouldn’t want to run the risk of facing criminal charges in the hopes of getting a home loan, and are more likely to tell smaller lies about things like pregnancy, which could also potentially affect their loan eligibility with certain financial institutions, Mr Hancock said.
Being caught lying about anything during your home loan application process will provide strong grounds for your application to be denied – and then you will have to explain why you were previously denied the next time you apply for a home loan.
Get a handle on your finances
Experity director Clint Howen said lying isn’t always the reason there might be discrepancies between reality and the information provided to banks during the home loan application process.
Instead, many people don’t have a good understanding of their financial situation.
“A lot of people have a rosy image of what their income and expenses are,” Mr Howen said.
“People just truly don’t know what their income and expenses [are] –probably 70 per cent of people that we deal with – which is … the more troubling figure that I see.”
If you want to get a home loan, you need to keep track of the money coming in and out of your bank accounts – and how much debt you have, Mr Howen said.
“You need to keep track of [debt], and keep track of your expenses to really get rid of that debt as quick as you can, and that’s where people get complacent.”
