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How does bank/government makes sure the next house is owner occupied?

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  • How does bank/government makes sure the next house is owner occupied?

    The new LVR makes investment property to have 40% deposit, but if I purchase the next house to live in, then it's 20% deposit, this has been verified by my mortgage manager.

    My questions are:
    1. how does the bank/government know that I live there? via utility bills?
    2. what happens if I move out after a period of time? eg. 1 month, 6 months, 1 year?

  • #2
    if too much of this sort of thing starts going on you can bet that departments will be tasked with checking.
    In Aus, the condition of the first home buyers grant is that you live in it as your primary residence for at least a year.
    Simple checks such as utility accounts, registered address for your bank accounts, car rego, benefits (WFF), tax returns etc.
    Not hard to do a bit of address cross matching.
    Food.Gems.ILS

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    • #3
      Originally posted by semaj_nil View Post
      1. how does the bank/government know that I live there? via utility bills?
      Because you'll say that you are on your mortgage application. If you lie then it's fraud. I don't know too much about this but my guess is that if you're caught filling out mortgage applications fraudulently then it might restrict your property investment ambitions.
      Originally posted by semaj_nil View Post
      2. what happens if I move out after a period of time? eg. 1 month, 6 months, 1 year?
      I asked my mortgage broker about this and they think it's unlikely that a bank would make you increase equity from 20% to 40% if you move out. Maybe banks will start putting clauses in the mortgage agreements that state that you have to inform them if usage changes, and maybe you would have to increase equity - all just speculation though.

      I think if you moved out and wanted to repeat this you'd have to change banks each time. They'll know what you're doing when you declare your financial position in your next mortgage application - what they then decide to do is anyone's guess.

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      • #4
        Good info, cheers.

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        • #5
          Never been tested to my knowledge as these definitions (owner occupied v. investment residential) have only been around a year or so - I.e they don't have anything in place to check if new lending is against owner occupier or investment property; relying on banks and customers to be upfront.

          BS2B which rbnz first used to separate lending between investors and owner occupiers last year uses this definition to make the distinction:

          “non property-investment residential mortgage loan” means a standard residential mortgage loan
          secured over only owner-occupied residential property.
          “owner-occupied residential property” means a property that meets the following criteria:
          (i) a natural person or related party of a natural person owns the property and one or other of
          these parties is the obligor under the residential mortgage loan;
          (ii) that natural person, or a related party of that natural person who falls within limb (c) of the
          definition of related party in this section, intends to occupy the property either as their
          principal or secondary residence (a secondary residence includes holiday homes or a second
          home where the natural person or related party spends significant time); and
          (iii) in respect of a secondary residence, no rental income is derived from that property, except
          to the extent that the rental income is minimal (e.g. a bach rented out for six weeks a year).

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          • #6
            I do wonder how a bank is supposed to act, given that they are now required to categorise properties as Inestment or Private, if they find the use has changed.
            I wonder what the requirements are on the banks?

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            • #7
              So who ever drafted that is leaving a gapping hole around someone 'intending' to live there but changing their minds after loan is drawn. And they can even derive rent immediately as the rent provision is only in respect to secondary residence.

              Can probably get away with that once only I'd imagine; although if not leveraging the first property, could potentially get bank to lend at 20% deposit on second place (intend to live in, and this time I mean it!) ; still no new investor lending on the banks books by the rbnz's own definitions.

              Comment


              • #8
                “non property-investment residential mortgage loan” means a standard residential mortgage loan
                secured over only owner-occupied residential property

                Also complicates cross colateralised loans. PPOR loan secured over both the PPOR and any rental property the person might have. Sort of implies that if they have a rental then they cant have a "non investment loan"
                Food.Gems.ILS

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