All Topics / Finance / Does LMI (Lender Mortgage Insurance) have a life span?

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  • Profile photo of richteddyrichteddy
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    @richteddy
    Join Date: 2005
    Post Count: 23
    May 23, 2010 - 12:27 pm

    Hi All

    Was reading somewhere that companies that supply LMI have a max total lend around 500K – 600K using LMI. Is this right?

    If so, does the loans you have cease to have LMI on them after a certain number of years and you can then borrow more  using LMI.

    Or once the property is revalued and you have more than 20% equity the LMI cease to exist then more loans with LMI can be accessed

    Or is it that you have a property purchasing life with LMI support loans of 500k – 600k total.

    Hope this question makes sense.

    Richteddy  

    Profile photo of BankerBanker
    Participant
    @banker
    Join Date: 2010
    Post Count: 371
    May 23, 2010 - 12:57 pm

    Hi Richteddy,

    max loan with LMI is higher; depending on the lender.. I dont know the max but in some case up to approx 1.5m is OK however It would be very expensive and hard to ge approved.

    If you revalue in the future and borrow 80% you won’t need to pay LMI again.

    If you borrow 600k at 90% today with a major bank you can go back to them in a few years and revalue; then lend up to 90% again. This sometime only incurs a small premium as you only pay LMI on the new funds (might only be a few hundred dollars). Therefore if your property has gone up 100k you can go from 600 to 690 for just a few hundred dollars LMI.

    Be careful with lender selection. A lot of nonbank will charge you onthe full amount again; ask before you apply how future increases incur LMI…

    Profile photo of BlueCapitalBlueCapital
    Participant
    @bluecapital
    Join Date: 2010
    Post Count: 1
    May 23, 2010 - 2:21 pm

    it is true what you said above… but nowadays it is risky to take a big loan.
    My advice: first of all make a financial plan

    Profile photo of BankerBanker
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    @banker
    Join Date: 2010
    Post Count: 371
    May 23, 2010 - 2:45 pm

    Just because you can doesn’t mean it’s a good idea. Everyones circustances are different:-

    There is nothing wrong with big loans for clients that have strong and secure cash flow. Loans of any amount can become a problem if you have trouble servicing them.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    May 23, 2010 - 9:55 pm

    Richteddy

    Also remember that LMI is a Loan Cost and therefore a deductible expense if the funds were used for investment.

    LMI is deductible over 5 years or the term of the loan whichever is shorter (being adjusted for the number of days from settlement to June 30 in Year 1).

    Normal Max is $1.5M cover per Company although QBE PMI will go higher if the deal is very strong.

    Richard Taylor | Australia's leading private lender

    Profile photo of richteddyrichteddy
    Member
    @richteddy
    Join Date: 2005
    Post Count: 23
    May 24, 2010 - 10:52 am

    Thanks for the info all

    Richteddy

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