Hey guys, I'm just wondering how a guaranteur works. I could possibly eliminate LMI if i ask my parents to use one of their investment properties as equity against my loan. I'm looking at purchasing my first property that is around $360k and have $25k to use towards the deposit, which equates to roughly 92% of the purchase price. However, when LMI is built into the loan this percentage rises to about 94% (these are rough estimates). My FHOG will basically cover my stamp duty etc.
I can understand why lenders need LMI but the whole thing just frustrates me as it seems like a waste of money. I would like to ask my parents to be guarantuers but I would hate to put them in an un-imaginable situation of having to pay off my loan in the event that I am unable to. My dad is nearing retirement and that situation would be the last thing he'd want on his plate.
Is there a way of eliminating LMI by using anything else aside from property as collateral. For example, could I use my car and home contents? I hope this doesn't sound like a silly question but I just see LMI as a huge loss on a property that will eventually become an investment property.
If anyone has any advice or perhaps recommendations on how they would deal with LMI (maybe save a bigger deposit, pay the LMI upfront etc) it would be greatly appreciated.
I thought because it was your first house you wouldnt be paying any stamp duty? In fact im certain as I brought a house 2 weeks ago
I was in a similar positon a few weeks ago when I purchased my first property. Because of the LMI that I was going to have to pay as I only had a 15% deposit I would have been unable to borrow enough. The bank offered to do a market valuation. I told the bank I thought I had got a great deal as the seller was about to go bankcrupt so they were happy to do 1, although went out of there way to say 99% of the time the bank will just value it at what you have offered.
I had paid $340 000 and the bank ended up valuing the house at $385 000
So seeing as I borrowed less then 80% of the $385 000 I didt have to pay LMIIf you have yourself a great deal maybe try and get the bank to do a market valuation. If you loan less then 80% of the "market value" then you wont have to pay LMI
I think thats how it all works anyway, correct me if im wrong
Unfortunately for me I live in Victoria and the government hasn't waived the stamp duty for first home buyers. However, we do get a $3,000 boost
I will keep that in mind when I purchase a property. However, trying to find a great deal in the inner west of Melbourne which is a high growth area is no easy task.
My parents got a good deal on a property in the outer suburbs, about 25km from the city in a new estate. Unfortunately there is an abundance of properties being built and sold in that area and prices have hardly budged there for the past 5 years.
Ahh yes I forgot about the Vics not getting the stamp duty relief
Doesnt really matter where the property is, if you find a buyer desperate to sell and offer a fast settlement you never know what can happen.
I had a look at the previous sales history for the complex im in and 1 townhouse (same size building, slightly bigger courtyard but backing on to major highway) sold for $429 000 a month before I put my offer in (still hadnt settled). My place was on the market for $439 000 and eventually came down to $389 000 and thats where I offered $340k, they asked $350 000 but I didnt budge (couldnt budge even if I wanted to and I probable would have)
Only 15k's from perth CBD, 400m to the beach, 200m to train station and in a surburb with a median house price of well over $1million and an extremely high growth area
^^^That sounds like a very awesome deal indeed. Good work dude! I'm being as vigilant as I can in my property research. i'm looking at all the factors you have mentioned but still haven't come across anything that isn't a pretty standard deal. Another main factor I'm looking into is rental income. My target is 5% of the property value each year, however I would probably bend slightly on this if the house or unit was smallish but the land had development potential.
No unfortunately without property security / family guarantee you will not be able to borrow more than 80% without mortgage insurance.
In saying this some lenders charge a risk fee instead upto 90% some to 95% which may work out cheaper than LMI.
Pays to shop around a little.
Your Broker should be able to help there.
Richard Taylor | Australia's leading private lender
Few lenders can waive LMI if you borrow just 85%. Last time I shopped ING and Wespac can do that.
For me LMI is a smaller lost. Growth should be larger than the LMI.
Say for a $400K property. 95% LVR would attract $7K LMI.
But if you waited next year to save more money for the deposit the property would have up by 5 – 10%. that $400K property would then become $420 – 440K.
So would you save $7K just to lost the opportunity of getting the $20 – 40K?
blaze… you must be brain-washed by the property spruiker which claimed property will double it price every 7-10 years.
I don't think it will be going up by 5-10% in the next few years.. in fact the opposite or stagnant.In this current climate, people are looking for every single $ to save
god_of_money wrote:I don't think it will be going up by 5-10% in the next few years.. in fact the opposite or stagnant.I was thinking the exact same thing! The buyers have all the power in this market. As much as I'd hate to pay LMI, I would probably go through with a buy if I thought it was an incredibly good deal with the potential to eventually get reasonably good capital growth in the long term. I'm in this for the long run and really only looking at areas in Melbourne close to the city with urban gentrification potential. Until I come across a deal like this I'll be saving more towards my deposit.
In the news today Ben Bernanchi (sp?) announced that he predicts the US economy to be in recession well into 2010 with possible positive growth in mid to late 2010. That is ofcourse if the rescue package the Obama administration has concocted actually works. So I guess it's safe to say that property will be stagnant or will decrease in value until 2011. This is a global economy so we can't be expected to grow without inviting a few of our neighbours to join us.
And even when that time come around, prices will rise very slowly. Interest rates will be low, unemployment will be higher. This makes the perfect recipe for low inflation.
Westpac have withdrawn their 85% no LMI product and ING still charge a risk fee instead.
There are a couple of others who will go higher without LMI however as mentioned still charge a fee.
Maybe cheaper depending on the loan size and location of the property.
Richard Taylor | Australia's leading private lender
god_of_money wrote:blaze… you must be brain-washed by the property spruiker which claimed property will double it price every 7-10 years.
I don't think it will be going up by 5-10% in the next few years.. in fact the opposite or stagnant.In this current climate, people are looking for every single $ to save
it was doubled in the previous years, werent they? Say a $400K property today was $200K on 1999 and $100K on 1989? I believe there are a lot of properties to be found on that path. Maybe not 5 – 10% to 2010. but $800K on 2019 is possible. but this would be in another whole discussion.
Back to the topic, if you really hate LMI then you have to snatch at the valuation like someone's above experience, buy a $340K property on a $385K valuation.
And if you really think property would be stagnant or decline in value, even with no LMI you should not buy the property.
Wooo.. as far as I know sydney property price has been stagnant for the last 7 years (i.e. since 2001)… if you taken inflation into consideration… it means BIG NEGATIVE growth… if you take into negative gearing BIG BIG LOSS….
Welll.. where are all the spruikers….????? used to be lots of spruikers in this forum… all gone… bankcrupt??
Not many advertised in the media regarding their seminars…. OR… discounted by almost 80% their seminar fee.long life spruikers….
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