I am purchasing my 2 Nd investment property. The bank says they require mortgage insurance because my first IP is NRAS so they will only lend 70% LVR. The LVR will be 71.4%. Is there any way to avoid paying an extra $1700 for the insurance?
Hi Wendy
Sounds like the bank is trying to cross collaterise your two properties – there's better ways of approaching this.
Personally, I don't view LMI as being a bad thing at all. It can be leveraged to grow the portfolio at a quicker rate.
I wrote this article for API magazine on the topic.
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]
Hi Wendy
As Jamie mentioned sounds like the 2 loans are cross collateralised and that is your initial issue.
Second problem is the 70% lvr.
Get your Broker to use a lender that goes to 80% on NRAS and you will not incur the LMI.
Seems like an expensive cost because the lender is too lazy to get the structure right.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard, can you suggest which lenders would do 80% on NRAS?
Jamie M wrote:Sounds like the bank is trying to cross collaterise your two properties – there's better ways of approaching this.I would really like to learn more about how to avoid cross collaterizing. How is it possible, when you need the equity in your PPOR as security for the IP loan? Thanks for info.
wendywoo wrote:I would really like to learn more about how to avoid cross collaterizing. How is it possible, when you need the equity in your PPOR as security for the IP loan? Thanks for info.Not a broker Wendy and I am sure one of the qualified brokers, Terry, Jamie or Richard etc will pull me up on any of the finer details.
But most people who want to avoid cross collateralisation will establish a line of credit type facility which is secured by your own home, use these funds for deposits and purchasing costs and then obtain a separate loan for the remainder of the purchase funds.
This means for example your home loan and line of credit could be with bank A and the remainder of your IP loan with bank B.
Are you using a broker or your own bank.
Reading the thread it seems as if you are doing this all yourself with you own bank.. If this is right get in touch with one of the brokers on this forum and use their services.
Getting finance structures right is a critical part of your investment journey too.
Hi Wendy
There are a couple but more detailed data would be need to make a recommendation.
Derek is bang.
I always suggest to clients we work backwards. Secure the 80% standalone amount on the new NRAS IP and bridge the 20% balance and acqusition costs on your own PPOR. Just get your current lender to provide an equity loan or LOC and tell them unless they will go past 70% on NRAS you are taking the business elsewhere.
Dont let them dictate the terms to you and especially where LMI is involved.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Jamie,
I note your article says you can depreciate mortgage insurance over 5 years for an investment loan. I was just wondering if a portion of the mortgage insurance was still claimable if originally the house was a PPOR but later became an IP? (and the loan became an investment loan).
Sorry to reply to this thread but I am a new member and can't work out how to set up a new post!
Your advice here is much appreciated.
Thanks,
RM
$1,700 ….thats one costly structure…
Save the $1,7000 and switch bank i'll say….80% LVR on NRAS is freely available ( interest rate as low as 5.39% fixed or 5.60% variable) + there's no need to cross securitize your loan…
+ some banks do offer no LMI up to 85%…
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hi RM,
You can confirm with your tax accountant, but from my understanding you would be able to claim pro rata from the point it becomes an IP.
i.e LMI is $5K total, PPOR becomes an IP at the end of year 3, you should be able to claim $1K in both year 4 and year 5.
Cheers
Tom
And some lenders go to 90% and the LMI still wouldn't be that high..
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Michael, other than Citibank, which other institutions are you referring to that go to 85% with no LMI? and do they accept NRAS security at that level?
Paradime wrote:Michael, other than Citibank, which other institutions are you referring to that go to 85% with no LMI? and do they accept NRAS security at that level?However original poster only mentioned NRAS was for their CURRENT property…the new property they are buying is not NRAS ( from what i read) .
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
No Ian Citibank do not accept NRAS properties as security.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Wendy,
You might find the below Youtube cartoon on Cross Collateralisation of interest, we created it for clients because most people do not understand why it is not a good thing.
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