Hi again,
Recently I've been troubled about how to get 20% deposit for my first home. I only have 35k saved and I'm looking into buying a unit around 320k or less (if I'm lucky to find one) in the NT so I would need a minimum of 64k. I want to avoid mortgage lenders insurance so that it doesn't affect my serviceability later on if that is correct to say and also avoid using my parent's as a guarantor which I understand you would still need to pay mortgage lenders insurance anyway and is cross collaterising which is also not a good idea?
Is it possible to have my mother get equity from her apartment (since she is close to paying it off, about 10k remaining) and open up a Line of credit to help fund my deposit shortfall?
Hi Jsoohoo
Having the loan mortgage insured will not have any bearing on your serviceability.
Loans in the main are credit scored these days together with a numerical formula whether it be DSR or UMI so i would rather buy now and incur some LMI or similar rather than wait until you had a bigger deposit saved and then find you miss out on the price increase.
Certain lenders have an alternative to LMI if the rest of the deal is strong so this maybe an option.
Richard Taylor | Australia's leading private lender
Mortgage Insurance is a means to an end. All businesses have expenses – In this event your expense is the LMI.
Borrow the LMI and this expense starts to look like chicken feed. e.g LMI = $3000 (interest charges = $180 p.a @6% – marginal tax rate = 31.5% , after tax cost = $123.30 = $2.37 pw) Now if one cannot afford this money then one should not be buying a property??????
Think and calculate the numbers for what they are……..
You have plenty of options just don't waste them.
Thank you all for your valuable advice. So LMI isn't so bad after all… As a first timer I was told to avoid it at all costs.
I fail to see why anyone would tell you it is that bad. It is merely an opportunity cost.
You pay it and you get the opportunity to move forward.
Dont get me wrong the premiums can vary from lender to lender and from mortgage insurer to insurer so your Mortgage Broker really needs to shop around for you.
Richard Taylor | Australia's leading private lender
jsoohoo wrote:Thank you all for your valuable advice. So LMI isn't so bad after all… As a first timer I was told to avoid it at all costs.Perhaps you were told this by people that don't invest in property
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
The other thing I really need to understand is how I would maintain a DSR to be 80% if I take out a loan of 90% (paying mortgage insurance of say 2%) of the purchase price. I read in Steve's book that maintaining a DSR of 80% is ideal but if I wanted to build a portfolio of say 5 houses within the next 5 years, would it be a bad idea to start off with taking out such a big home loan.
DSR is just one calculation lenders use and means very little.
As i mentioned in an earlier post most loans are credit scored these days so DSR has little bearing on serviceability esepcially where the loan is mortgage insured.
Also bear in mind every time interest rate move DSR will change and could be meaningless.
Richard Taylor | Australia's leading private lender
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