Is mortgage insurance the same for all lending institutions or do they set their own rules. As an example, I was allowed to borrow 90% of the price of my first home back in 91/92, but I needed to pay MI.
When we took out a loan for the first IP using the equity in our home, the bank said that if we got up to 80% on the combined value of the home and the IP we wouldn’t have to pay MI.
So – my question is this. If we borrowed for another IP, could we take the equity in our first home to 90% and the new and other existing IPs to 80% without paying further mortgage insurance (we’ve paid it once already).
Also, now that we’re looking at having combined borrowings of over 700K (all residential), the bank has now said that MI kicks in at > 70% and not the 80% it used to be. Is this standard?
Any tips on MI would be great.
Cheers,
Jon.80% is standard I think, but not a set rule
Hi NJ
No. LMI policies are no necessarily the same with all lenders. It depends on the lenders policies and what risks they want to insurer.
Yes, you will probably have to pay LMI again because the lender would need to take out a new policy.
Yes, lenders will reduce the LVR if loan sizes start getting over $400k/$500k (or $700k in your case). It appears that you have the properties all under one loan. Not a good idea. How about trying to split the loans (thereby each individual loan is less than $700k (or $500k depending on policy) and mortgage insurance should only kick in if over 80%. I.e. have one loan secured by home and second loan secured by IP.
If possible take the lower value loan over 80% because LMI is calculated as a percentage of loan value. Therefore, the smaller the loan the smaller the premium.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au
Yes, lenders will reduce the LVR if loan sizes start getting over $400k/$500k (or $700k in your case). It appears that you have the properties all under one loan. Not a good idea. How about trying to split the loans (thereby each individual loan is less than $700k (or $500k depending on policy) and mortgage insurance should only kick in if over 80%. I.e. have one loan secured by home and second loan secured by IP.Actually have 3 separate loans – although I’ve used equity from the first to buy the second, and equity from the first two to buy the third.
First was the basic home loan (where I live) – back in 92
Borrowed using equity on the home loan to get the first IP (zero down – borrowed the lot). Both properties went to 80% – this was in 2001.
In 2002, we had enough equity in the first two places to buy a third. Used that equity to buy the third place (again, with no cash – just the equity). All three places were back at 80%.Now we have more equity (average debt:total value = around 58%). We spoke to the bank, yet because we’ll then owe > 700K, they want to take us back to 70%.
Hope all that makes sense.
Lenders rationale for reducing the LVR on high loans is because they are normally secured by higher value properties. As such the lenders consider the pool of potential purchasers to be significantly smaller for properties worth $800k as opposed to properties worth $300k.
However, NJ your situation doesn’t seem to make sense unless your using a smaller lender?
Who is the lender?
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auSt. George
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