Hi all,
On purchasing a property under $100k for wrap purpose, I assume it is safe to put 80% LVR but on properties above $100k, especially those that may be cashed out in 12-18months is 80% LVR worth doing or should one still pay mortage insurance and use 90% LVR? I guess your still paying for it with debt. What’s the best way to go about this?
I’ve had it on very good advice to just use 80% LVR, but when doing the figures on 80% it doesn’t look worth it, as you only start to recoup the initial outlay (‘closing costs’) after 2 years? I might be wrong, any ideas?Cheers [
]Soosh
It’s all our imperfections that make us perfect!
Edited by – [email protected] on 07/10/2002 5:28:53 PM
Hi Sooshie,
My personal opinion is to get into the deal for as little money down as possible. The extra 10% of the purchase price you put in is only earning the underlying mortgage interest rate of 5-7.5% p.a. (plus mortgage insurance savings which aren’t substantial enough to improve the figures too much).
On the other hand, if you could use that other 10% on a separate deal to return 20, 30 or 40% plus p.a., then why would you lock away the extra funds for returns under 7.5% p.a.? For me, the most important thing is getting each dollar to multiply as fast as possible.
Of course, there are many differing opinions that may make the alternative a better option for you (I believe Steve likes to pay off the underlying mortgage as fast as possible), but for the way I do things it would take exceptional circumstances to lock $1 more into a deal than I have to. The more cash I have ready to invest, the faster I can do deals and the more cashflow I can get churning out (which means, of course, getting out of the rat race faster!).
Work out how much the difference adds up to over 20 years and see how much it will cost you to put in the extra 10%, and see if it’s worth the perceived risk reduction for you.
Kind regards,
Marcus.
***********
Visit http://www.positivegearing.com/join to
join the Wrapper Referral Program
***********
]
The topic ‘80% or 90% LVR?’ is closed to new replies.
