According to lending data from the Australian Bureau of Statistics, home loan applications and new mortgages continue to rise. Even with housing prices continuing to surge and COVID-19 lockdowns taking place around the country, the Australian property dream is as strong as ever.
Considering the financial gravity of taking on a mortgage, it’s surprising to learn that lying on mortgage applications is more common than you’d think. However, with investors returning to the mortgage and a short supply of affordable properties (or properties in general), it’s easy to see why some applicants would fudge the numbers to get their foot over the line.
Unfortunately, even the little white lies on a home loan application can have big consequences down the track.
What are the common lies borrowers tell on a home loan application?
Research conducted by Experian revealed that nearly 25% of home loan applicants lie on their applications in some way. Those who admitted to lying on their applications said they did so because they thought complete honesty would see their borrowing power reduced or the application rejected entirely.
The data revealed that the most common lies told on home loan applications are:
- 19% did not disclose that they or their partner was expecting a child
- 29% did not disclose an upcoming change to their employment circumstances
- 21% exaggerated their annual income
- 28% underreported their existing debt
Other common lies told by borrowers:
- Overstating the value of assets
- Mislabelling an investment property as an owner-occupied property
- Using false employment details
- Misstating the source of deposit funds
- Claiming false residency status
What are the potential repercussions of lying on a home loan application?
Lying on a mortgage application may seem like an easy way to get your foot on the property lady, but there are serious potential repercussions, whether you’re caught or not.
Your loan could be rejected
If a lie is uncovered during the application phase of the loan, it will be rejected. Not only will this affect your credit score, but it could also prevent you from getting a loan in the future. There is a possibility the bank will blacklist you, meaning they won’t consider you for future loans. Banks do share data, which could lead to being blacklisted by multiple lenders. So that little white lie could see homeownership dreams dashed.
Your loan could be called in
Don’t assume you’ve gotten away with it if your loan is approved. Banks routinely conduct post-settlement audits on approved loans to ensure nothing has slipped through the cracks. If you’re caught lying in the post-settlement audit, your loan could potentially be called in. A call loan must be repaid in its entirety within 30 days, which would most likely mean selling your home and flushing fees associated with the loan down the drain.
You could experience long-term financial hardships
If a lender tells you that you can’t borrow a certain amount, it’s usually for a good reason. Lenders can sometimes be quite generous when estimating your borrowing power, and it’s often recommended to aim in the middle of their recommendation to ensure you can comfortably make your repayments. So, borrowing above that amount is usually a bad financial move – saddling you with a loan you can’t actually afford. Getting creative on your home loan application to borrow above your means is a recipe for disaster, leaving you at risk of mortgage stress and a painful loan period.
How do lenders find out you’re lying?
Lenders have multiple ways to detect fraud in loan applications.
Banks can easily determine if you’ve exaggerated your income or underreported your household expenses by cross-checking with the documents you have provided them. In addition to good old-fashioned manpower, banks use sophisticated technology to detect if any of your supporting documents have been tampered with or altered.
They also share data with other banks, which could reveal any discrepancies between loan applications, and as mentioned before, lead to being blacklisted from multiple lenders.
If not lying, then what?
If you feel you need to lie on your mortgage application to be approved for a certain amount, it is a good idea to reassess your homeownership dreams. Whether that means looking in a different area, considering a unit or apartment over a house, or asking a parent to go guarantor.
If you aren’t willing to budge on your budget, it would be worthwhile talking to a mortgage broker and discovering the many lenders out there who lend to people with complicated finances.
In some instances, a mortgage broker can help make a few above the board tweaks on an application to get a borrower across the line with their preferred lender.
Words by Nell Matzen
- Australian Bureau of Statistics Lending Indicators May 2021
- Have you fibbed on a home loan application? You’re not alone
- White lies & lofty expectations: demand for rapid mortgage approvals unmet, consumer survey reveals
- The penalties for lying on a home loan application
We’re committed to making your home loan journey go smoothly! Our eChoice brokers can help get you a credit report to see if your expenses will affect your application and discuss any unnecessary debts that might jeopardise your chances of a home loan approval.