Possibly the silliest question ever asked BUT...

Viewing 5 posts - 1 through 5 (of 5 total)

as41
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@as41
Join Date: 2005
Post Count: 108
June 14, 2006 - 10:35 am
I have paid off a small chunk of $$$ from my home loan…..That means that portion of the house belongs to me right? So then….does that mean I can refinance the loan to access that money of mine??????to buy another property right? Do I have to pay this money back to the bank or is this portion mine to use at my discretion and dont have to pay it back.. cause I ‘ve paid it off havent I????See , its a silly question but I need a laymans explanation… please… please…….I am just trying to learn…..[inlove]
Snowflake
red_rogue
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@red_rogue
Join Date: 2006
Post Count: 18
June 14, 2006 - 11:00 am
Lets say you have a $100k house and you owe the bank $90k. You then pay the bank $10k so you now own $20k of your house while the bank owns $80k. If you Refinance then you are borrowing BACK off the bank, the $20k that you own in the house. So if you refinance $5k then you will own $15k and the bank will own $85k.
You can indeed refinance to get the deposit for another house. EG you own $20k the bank owns $80k. you refinance $10k and borrow another $90k to buy the new house. you now owe $90k for the old house and $90k for the new house ($180 in total) but you still hold $20k between them ($10k in the first house and $10k in the new).
as41
Participant
@as41
Join Date: 2005
Post Count: 108
June 14, 2006 - 11:34 am
THANKS RED-ROUGE[inlove]
It was as I thought….. so this makes me question, If you refinance your first IP to get the 20% for your second IP, you will increase the LVR of the first IP to above 80%, then you have to pay LMI again when you refinance correct? ….How then do people get around that unless they spend their own money paying off IPONe so that even if they refinance to get 20% deposit they still have 80% LVR on it????OR…IT would take years for tenants to do this.. unless you have heaps of capital gain right?????????
Sorry I know they way I have written this may not make much sense but I;m trying!!!! thanks again…..any more insights…….
Snowflake
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
June 14, 2006 - 1:47 pm
Sometimes LMI is unavoidable. It is just a cost of speeding things up. You have to calculate if you think it is worth paying it now (around 2.5% of loan amount for a 95% loan) or waiting to save more and get some more equity.
Terryw
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Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
June 15, 2006 - 1:08 am
As Terry mentions LMI is an economic cost of investing.
You can either pay and move forward with your investment plans or alternatively wait until you have 20% equity each time and go a little slower.
Most larger investors prefer to gear up a little higher and accelerate their investment pace.
Shop around for LMI premiums as they do vary considerably from lender to lender and from company to company.
Richard Taylor
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