Hey guys,
I am only new to property investing and will be looking to purchase my first IP in the next 12-18 months.
I have a question about deposits though – is it better to get into the IP game as early as possible? Or should I be looking to have at least 20% deposit so that I don't lose money through having to pay for LMI and paying more interest?
Currently in the process of building my PPOR, so I'm not sure if (potentially) having equity makes a difference to the situation.
Thanks in advance,
Mike
Having equity in your PPoR definitely make a difference because you can use that equity as the deposit for your IP.
In my opinion,
Being on the ladder is what matters. if you have LMI to pay, depending on your strategy with that particular property you may not notice it long term eg: if you planned on holding the place for 10 years and LMI was 9 grand it isnt much in the scheme of things. i guess it just depends on how good that deal really is to your situation. I personally would cop LMI to get a good deal across the line if the numbers still worked.
Ben
Ben Kelleher wrote:In my opinion,Being on the ladder is what matters. if you have LMI to pay, depending on your strategy with that particular property you may not notice it long term eg: if you planned on holding the place for 10 years and LMI was 9 grand it isnt much in the scheme of things. i guess it just depends on how good that deal really is to your situation. I personally would cop LMI to get a good deal across the line if the numbers still worked.
Ben
Hi Mike,
I think Ben makes a valid point.
Depending on your investment strategy, timing of a particular market, and time in the market…LMI costs may prove to be insignificant compared to any growth you may be missing out on being out of the market just trying to save for a 20% deposit. Work out what risk level you are comfortable with before hand, your finance capabilities and serviceability. Getting into a particular market 6 months early before it starts to move may be an extremely valuable strategy on a 90LVR or even 95LVR IMHO.
JT
Yeah, I had a feeling that was the case. The main reason for me double checking was that I can sometimes be a bit quick to jump to conclusions and am very enthusiastic by nature, meaning that I don't always think things through as well as I could. And given the investment size of buying property, I thought double checking might be a pretty good idea, heh.
I'm hoping that the value of my PPOR increases once the build is finished – I've been told that a new house increases in value by 10% the minute that you unlock the front door. If that actually has any truth to it, the equity I'll gain just by having it finished might mean that I can get in early AND avoid LMI and other fees.
plus now is a buyers market, they they have been in the past a rare event.
A house does not necesserally go up in value as soon as you finish a renovation or complete building a new home. It all depends on your suburb/towns performance. For example i just finished a renovation in a inner city suburb of Brisbane, but currently i cannot increase the rent to what it should be worth because many people who rented in those areas have now bought their first home thanks to government stimulous.
Becasue demand has droped so have prices. But it all goes in cycles and this time next year the values and rents will be where they should be.
Personally i never saved a deposit and paid LMI when i first started. Im a shocker at saving so it would have taken me many years to save 20%
Agree with the above posters. The LMI you pay now is likely to be insignificant in terms of the long term growth your property is likely to achieve. It's also a deductible expense
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Also remember whilst LMI it is deductible over 5 years or the term of the loan whichever is the lesser there are also lenders that dont charge LMI upto 85%, others that charge a fee instead and other that pay the LMI themselves on a 90% deal upto a given amount.
All of course subject to nice clean credit but could save you a few $$$$.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You can get a lower interest rate if you managed to have LVR < 65%
god_of_money wrote:You can get a lower interest rate if you managed to have LVR < 65%True – but I'm not sure if a 0.1% discount with Choicelend (I'm assuming that's who you're talking about) in exchange for a 35% deposit is a good deal
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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