Just wondering if i have enough equity to purchase a block of land while the saga of selling my current house continues. My house has been valued at $425k and we owe $293K. The block of land that we have signed for is $309K + stamp duties in SA.
Is this correct?
Total debt will be 293 + 309 + about 12K stamp duty = 614K
Equity = 425 – 293 = 132K
132K / 614K = 21.4% Which would mean no LMI, but….. do banks add that horrid 20% buffer zone to the value of my house? So instead of it being 425K it would be valued at $340K in the eyes of the bank?
This would change the figures to:
equity = 340k – 294 = 47k
47k / 614k = 7%
???
My broker tells me that there is no 20% buffer for this type of lending.
Im sure someone can help.
Thanks
To be honest i am slightly unsure as to what you are referring to.
I have never come across any lender that applies a buffer as you have described.
Simply if the lvr (which is the new loan as a percentage of the new valuation) is over 80% then you will incur mortgage insurance.
On your figures loan seems to be at 84% so LMI would be incurred but in saying this you would structure it so that you minimised the loan by using 2 different lenders. (LMI on a total loan over $500K will not be cheap).
Richard Taylor | Australia's leading private lender
Your house has been value by who??
banks or real estate agent?Valued by the bank.
I think my terminology is what wrong. There is an 20% buffer, its the fact that the bank will only lend 80% of the value.
Can someone do the math for me please correctly.
PPOR is valued at 425K
We owe 293KWe wish to buy a block of land for $309 + stamp duty. The block of land has been valued by the bank at 309K.
Please show me the workings so that i can understand for myself.
Thanks.
Sorry i thought i had done the calculation in my previous post.
Total Loan required = $293K + $309K + 12K = $614,000
Total valuations = $425K + $309K = $734,000$614,000 / $734,000 = 84%.
Richard Taylor | Australia's leading private lender
Ah, thats what i thought, thanks for clearing that up. So that means a LMI of about $5k
All because the ppl who have a contract on PPOR have failed for finance
5K in the toilet.LMI will be nearer $8K and if capitalised will be more because the LVR is greater.
Remember because the loan is over $500K then the premiums start to leap.
Sure your broker has told you would be better off to split the loans between 2 different lenders to reduce the cost or alternatively use a relocation loan lender.
Richard Taylor | Australia's leading private lender
Perhaps its time to ask my dad for a family pledge to avoid LMI? It will only be needed while we finish off selling our current house.
Forget the family pledge just get him to tip in the cash otherwise you have security doc costs and valuation etc etc.
Richard Taylor | Australia's leading private lender
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