Hi,
I have just bought a property fro $530K in Sydney. I have another investment property which was last valued at $415K with $250K owing.
Thus my equity is 80% of $415 ($332) – $250K = $82K. As I need $20K for stamp duty I am really only left $62K. Putting thoose figures through the Wizard Purchasing Costs Calculator the estimated mortgage insurance is $6K.
Now obviously I don't want to pay $1 for an unrecoverable cost and would like to know what options I have. Do there exist financers who will take on high income earners and waive mortgage insurance? Are there other options?
Thanks Petros
To answer question I really dont know.
I might have misunderstood your maths but the way I see it.
You have property worth 415k owing 250k and you want to buy a property worth 530k.
So properties worth 945k X 80% = 756k – debt 250k = 506k 80% lend24k + cost to do the deal
945k X 85% = 803k -250 = 553k 85% lend
this would cover loan and costs
One of our lenders offers disounts on LMI if have 5 % genuine savings so you would not have a problem
That's a specific finance question that I can't answer but my attitude is "give me the money" with or without mortgage insurance. It is a small cost compared to the huge cost of not aqcuiring properties.
Hi Pman,
Mortgage Insurance usually is triggered by the LVR – loan to value ratio of your borrowings – and usually kicks in at or around the 80% mark, depending on the lender. Therefore if you keep your total LVR under 80%, then there probably will not be any mortgage insurance.
How do you keep the LVR under 80% ? Either borrow less, or save more for a deposit, or wait until your current equity is slightly larger ( which relates back to "borrowing less").
I hope this helps,
Thanks,
BDM
I am glad others are discussing this as I am trying to come to grips with this. I am currently reading 'More Wealth from Residential Property' by Jan Somers, and her discription of LVR seems to open up a number of possibilities which I believe are also being stated above.
Here is my situtation:
Current House Value $300,000. Own outright
Potential Investment Property $400,000.
Savings for fees etc $25,000.In my case, if I buy the Investment property and take out a mortgage of $400,000.
My LVR is mortage / (Current house + Investment)
: $400,000 / (300,000 + 400,000)
: $400,000 / $700,000
: 57%So from what I have read above, although I am borrowing the entire value of the property, I would not have to pay Mortgage insurance.
Is that correct??
Thanks
brettc you are correct if you put down both properties as security.
Or take equity out of one by way of a loan increase with a split and the use it for the other saves cross collateralising
Hi Pman.
There are some lenders (Westpac for example) that will waive LMI up to 85%….
Otherwise look for a lender that is capable of taking on the risk themselves, ING do this for example. (they do this for a price, usually better than the insurers)….
ING could be the way. I just wrote one loan where client paid zero insurance on 85% lend. Also Homeside are very flexible on their policy and depending on the deal may be able to waive some LMI. Talk to your broker to discuss the possibility.
Irrespective of the LVR the way that you structure the loan is more important.
Many new brokers who are not property investors themselves do not understand the mechanics of cross collateralising loans and the potential long term problems this course of action could cause.
Richard Taylor | Australia's leading private lender
Hi all,
Thanks for the great advice!
My mortage broker is going through Homeside and is pretty certain he will get LMI waived. He told me that he can get it through Homeside, Commonwealth and ING. I think it does depend on the strength of the application, size of the loan and the relationship the broker has with bank.
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