Honesty, as a whole, is an admirable trait that human beings should hold. There’s a saying that honesty is the best policy. However, there are instances wherein a little white lie is needed so one’s feelings are spared. But when it comes to honesty in your applications, it’s a little bit more complicated than that.
Securing a home loan can be a difficult thing to accomplish. Requirements are no longer as simple as it was. Banks have become stricter and have been looking at financial standings actively and meticulously. Ever since the royal commission into banking has transpired, securing that home loan has turned into an incredible feat. Unfortunately, some borrowers seem to think that it’s worth putting their financial future at risk.
A recent study conducted showed that a third of homebuyers have lied on their home loan application.
The investment bank UBS did a survey on 903 Australians who had taken a mortgage within the financial years 2018-2019 and asked whether they were completely truthful on their mortgage applications. Astounding results show that there has been a rise in “liar lions”. About 37 percent of mortgage buyers admitted that they lied on their applications. This is an increase from 32 percent of the previous financial year.
Dishonesty on Home Loan Applications
According to the data, borrowers who were not truthful to their applications “overstated their incomes” and “understated their debts”. They were not factual about their living conditions at that time. Two-thirds of the group who bought more than one property during the financial year admitted that they have lied on their applications. Additionally, half of the borrowers with two or more properties and half of those that were rejected also lied about their applications.
The results get even more interesting. Majority of the borrowers that lied on their applications mentioned that they used the service of a mortgage broker and it was then who suggested doing file an inaccurate application.
Many have gotten away with lying on their application although they knew for a certain about the risks. You are probably wondering now; does it really matter if your home loan application is not as truthful as it should be as long as it’s approved? What actually happens when it’s found out?
Chances are, at first, nothing will happen. At least not right away.
Experts have pointed out that the only time borrowers are caught doing this is when they are not able to pay the loan they have secured. A full-on investigation will be conducted if the borrower is unable to pay the loan which would force them to answer questions in regards to following the legislation. If it’s proven that they have indeed lied on their application, they will be in some major trouble.
Biting Off More Than They Can Chew
The number one reason why borrowers lie on their application is to secure a bigger mortgage. This means they are approved for loans than they really can’t afford. The same study revealed that unlike honest borrowers, the majority of the borrowers, specifically 22 percent of those who were not truthful in their application have missed a payment, which made it much easier to get caught.
Lying on your home loan application also meant a breach of contract. With the transition to comprehensive credit reporting as well as open banking underway, lying on your mortgage application wouldn’t be as easy as it was before.