Hi all,
Just a quick question regarding LOC limits. I currently have a property worth $280K and loan balance of $204K. If I had to take out a LOC, what would be the LOC limit? Is it the full $76K (280K – 204K) or is it $20K (80% of 280K – 204K)? Is there any LMI involved here?
Thanks in advance.
Depending on the limit your lender allows you to use, your LOC will be funds available, minus any existing debt.
So, if your lender allows you to use 80% of the value of the property, and it's worth $280k, then the LOC will be $224k.
You still owe $204k, so you can use $20k.
There is usually no LMI on LOC's.
There is usually no LMI on LOC's. – On the basis that the loan is not with a securitised lender.
Otherwise like other loan irrespective of the LVR the loan will be mortgage insured.
You can also go to 90% LVR but will incur LMI although this is of course Tax deductible as a Loan Cost.
Richard Taylor | Australia's leading private lender
Thanks guys. One more question, how does the LMI work then with LOC? For example, I currently have the IP worth 280K with a 204K balance on just a standard variable loan. If I had to take out a LOC which had a limit of 48K (assuming that is 90% LVR) but I only draw down say 15K (for the moment) which means the LVR is under 80% do I still get charged the LMI since the limit of the LOC is above 80% LVR? Or do I get charged LMI once I draw down more then the 80% LVR? Would the LMI get added to the variable loan balance or LOC?
Zayne
LMI is calculated on the limit amount once the loan is approved even if you dont ever use it.
With some lenders it will be capitalised rather than deducted from the loan proceeds but is upto the individual lender.
Richard Taylor | Australia's leading private lender
Thanks guys. Much appreciated.
You can be limited by the level of income you earn as to how much you can borrow. This is happening to me with my LOC
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