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Income issues

Lorna and Robert wanted to purchase a rental investment property and spoke to a mortgage broker about their options. Lorna and Robert had tenanted their home and moved in with their daughter to save money. The mortgage broker suggested Lorna and Robert increase their borrowing on their existing home loan by $300,000 and borrow $500,000 from another bank, allowing them to buy a house for $800,000.

Over the following months, Lorna and Robert looked at quite a few properties, and checked in with their mortgage broker regularly that the bank would be prepared to lend. Finally, they purchased a house at auction for $730,000.

However, when the bank reassessed the application, they discovered Lorna and Robert were no longer living with their daughter and had moved back to their own home. Lorna said she had told the mortgage broker about this a couple of months earlier, but the mortgage broker did not recall Lorna’s advice. As Lorna and Robert no longer had the rental income from their own home the bank reduced the amount it was prepared to lend. Lorna and Robert had a shortfall of about $90,000.

Lorna and Robert were able to make up the shortfall and purchase the property by using:

  • holiday savings
  • money saved to repair the roof on their home
  • their credit card
  • $30,000 from a finance company.

The mortgage broker did not accept any responsibility for the loss, but offered Lorna and Robert $7,500 to resolve the complaint. Lorna and Robert did not accept the offer and referred their complaint to FSCL.



Lorna said that she had told the mortgage broker about two months before buying the property that they were no longer living with their daughter, yet the mortgage broker assured them they could continue to borrow up to $800,000. Lorna said that, if the bank was not prepared to lend without the rental income from their home, they would not have bought such an expensive property. As a result of the mortgage broker’s assurance that they could borrow up to $800,000, they were in a very precarious financial situation.

The mortgage broker was sorry that Lorna and Robert were in financial difficulty, but said that she did not know they were living in their home again. The mortgage broker felt that Lorna and Robert were responsible for the financial difficulty they were experiencing.



During our review of the complaint Lorna found the email she had sent to the mortgage broker advising that they had moved from their daughter’s place back to the own home. In subsequent emails the mortgage broker continued to advise they could borrow up to $800,000.

When we sent this email to the mortgage broker, she indicated a willingness to resolve the issue. Lorna said that she would accept $27,000 as compensation for the additional interest they would pay over the next 8 years on the various debts they had incurred to purchase the property.



The mortgage broker offered Lorna and Robert $20,000 to resolve the complaint. Lorna and Robert accepted the offer and the complaint was resolved.


Insights for consumers

Even if you have given your broker some important information, it pays to check that your broker has heard you. Lorna acknowledged that she was surprised the banks were still prepared to lend $800,000 after they had moved back home, but did not query the mortgage broker. The mortgage broker had simply overlooked the email and was proceeding on the basis that nothing had changed.