quick query re loan mortgage insurance

at 80% lvr on a standard product you wouldn't pay LMI. From a lenders point of view at 80%, funds to complete can come from any source..savings, redraw on another loan etc..

you may need to pay lmi with your current lender on the increase though depending on your exposure…

Carln

Other lenders have alternatives to LMI which may prove cheaper and allow you to go to 90%.

carlin,
           Ok Thanks. Good luck. I suppose if you have some calateral and some deposit you can use different lenders to avoid the LMI or each lender, but I would have thought the lenders would want to know where all the money was coming from and check up and see for themselves? But I haven't read the API article, so maybe I should.

Hi Carlin,

I did this and it was sweeettt………  Was buying IP worth $950k. Borrowed 80% from Westpac, borrowed 20% as personal loan from Citibank.

Interest rate on citibank loan was obviously much higher than Westpac. I furiously paid off the citibank loan. Just finished paying citibank off 3 months ago. In total, LMI would have been in the vicinity of $23-$25 k. Instead I paid only 3% (the difference between citibank and Westpac rate) of 20% of 950k.

Beat the banks at their own game!

Hope you have the same luck 

Hi Carlin,

I was able to show my accountant that 100% of Citibank loan went into the mortgage as suppose to paying lawyers fees, stamp duty etc. He let me have it as a deduction. He says it doesn't matter what loan you have, as long as the purpose is for investing. If you are "stupid" enough to invest with the more expensive loan…

The catch is, you must not tell the bank or they won't let you, they'll insist on LMI. It is also about timing:
For mortgage pre-approval, bank doesn't need proof of 20% money sitting in your acct for 3 months
The 3 months proof is only required when you already have the property and about to sign the contract.

So I took the citibank loans when I was still looking. The money was sitting in my saving acct whilst I continued looking for the property. Lucky I found it a few weeks after citibank loans and arrange for contract day to be a few weeks after the 3months citibank date… just to be safe. 

Because my savings acct was with Westpac, the lender looked into my acct himself and was happy to sign off the final mortgage approval.

So the key is timing and planning… good luck!

PS: I hate mortgage insurance because it is for the bank's benefit, not me.
Purchase price is $950k. If I go bankrupt, the bank sells my house..  say for $890k. The remaining $60k they claim from the insurance company while I get nothing.

So it benefits them, not me. Honestly, why cough up $23,000 of your hard earned money just to safe their b***??!

Hi Carlin,

Don't really understand your position: so you're saying your equity in your existing PI or PPOR is 65% and you are buying another PI of $180k. Probs is, the lender may slap you with LMI?

I'm not sure whether you think the hassle associated with getting a PL is worth it. I'm sure you're also very good in money matters.

Given your time frame and the fact that your mortgage lender already logged their search with Veda Advantage, it'll be trickier to get a PL… this is because your PL lender will know that you've been shopping around for a mortgage. And if they're diligent, they'll contact your mortgage lender. Which means your serviceability in the eyes of PL lender will be diminished. 

But should you decide to do a PL… let me introduce you to another potential hazard    sorry, don't mean to scare you away.
If you decided to get the PL, make sure the mortgage lender doesn't know anything about it. ie. proceed from PL and monthly installments should be hidden away from the mortgage lender.  In my case, the proceed from citibank went into my acct with bendigo bank and I transferred it into my westpac acct. Hence westpac didn't know I had a PL with citibank, otherwise they would have reduced my serviceability.

Good luck.

Cattleya

In that case, Why not just have IO and pay the loan down as a PI and then you could use the redraw (or even better, just use a offset account) for the deposit on the next property – will save you borrowing as a personal loan (and deceiving the bank by not telling them), it will save you interest and fees and be more tax effective.

Hi Terry,

Yes I could do that, unfortunately my equity was not enough to cover the 20% deposit + expenses. So I had to borrow the rest. But I'm back below 80% now…  phew….

Hi Tim,

Thanx for calling me crap. I know I was 'creative' but I challenge your claim that it was illegal. There is no law saying that you have to disclose everything to the bank. There is only a statement in mortgage application form saying you have disclosed everything. And because you sign this, it becomes legally binding.

Now, before you jump on me… this application forms are drafted by the banks. THEY established all the rules and we are forced to abide by it. Anyway… good citizenship says you should play by the rules. But I'm not willing to give up $23000 for nothing… and for the greedy banks too.

I can understand why it is in your best interest to scare the public into succumbing to the Bank's rules because that's how you earn your living.

sing with me will you…

Regrets, Ive had a few;
But then again, too few to mention.
I did what I had to do
And saw it through without exemption.

I planned each charted course;
Each careful step along the byway,
But more, much more than this,
I did it my way.

Yes, there were times, Im sure you knew
When I bit off more than I could chew.
But through it all, when there was doubt,
I ate it up and spit it out.
I faced it all and I stood tall;
And did it my way.