Yes couple of things with Citibank and that is the LMI waiver is post code restrictive so will depend on where you are purchasing.
Secondly with settlement in 3 weeks you would be lucky for Citibank to have even looked at the deal by then let alone approved it and had the loan documents ready.
Thirdly they have one of the worst serviceability formulas i have ever seen for investors so you might fall at the first hurdle and be left in the lurch which could prove expensive if you don't settle in time.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
If I was at 87% lend and paying the 13K LMI and had the 13K personal debt, then I probably wouldn't buy the property to start with – But that's just me.
I guess my point is that we sometimes get blinded by the "tax deduction" value which doesn't always mean you are "saving" or getting ahead. I refuse to pay LMI, and don't think that the fact it is a tax deduction means it's a good idea…
I have used citibank for 2 properties and will most likely roll a third at the end of the year to them as well. I have a good contact in Brisbane who was exceptional compared to other banks. Good after settlement service and follow-up too, which no one else seems to have.
They lend to most postcodes with a decent population. One of mine is in Rocky and that was fine. Both are positively geared as well which may assist.
Both of my settlements were 30 days as well so they can be done if needed.
Happy to pass on contact if you're in Brissie.
….I sound like a Citibank ad!
Hi Geddo,
I agree LMI should not be used simply because it is a tax deduction. I see it as a 'preservation of equity' tool.
For example – assume I am buying a $500K property.
At 80% LVR I need 20% deposit ($100K) + 5% purchasing costs ($25K) means I require $125K of my available equity to purchase this property.
At 90% LVR I need 10% deposit ($50K) + 5% purchasing costs ($25K) + 2% KMI premium ($10K) means I require $$85K of my available equity to purchase this property.
The nett result is that I still have $40K of my equity left in my war chest.
N.B. I am not sure what LMI premiums are at the moment so the $10K LMI premium is only indicative.
Hi Derek,
Thanks, I certainly see your point, which I guess helps to accumulate more property, quicker.
The $40K does come at a cost though and adds principle to the loan, which may suit some. I guess I am a little more conservative with leverage, and also the cost of that equity.
Maybe as middle ground go the 85% lend, no LMI and still keep $25K in the chest.
Has anyone ever negotiated LMI with a bank for LVR 85%+.
Geddo wrote:The $40K does come at a cost though and adds principle to the loan, which may suit some.If you are using cash to fund your deposits then there will be additional borrowings to the tune of $40K but if you are borrowing the lot, the total borrowings only increase by $10K.
Bottom line is individuals need to make sure they do not over extend themselves and should a strategy they are comfortable with. Having said that I would encourage all investors to regularly review their strategy, especially as time elapses.
Hi Geddo,
Just reworked my earlier reply for someone who is using cash to fund their deposit and purchasing costs (below)
"I agree LMI should not be used simply because it is a tax deduction. I see it as a 'preservation of cash' tool.
For example – assume I am buying a $500K property.
At 80% LVR I need 20% deposit ($100K) + 5% purchasing costs ($25K) means I require $125K of my available cash to purchase this property.
At 90% LVR I need 10% deposit ($50K) + 5% purchasing costs ($25K) + 2% KMI premium ($10K) means I require $85K of my available cash to purchase this property.
The nett result is that I still have $40K of my cash left in my war chest.
N.B. I am not sure what LMI premiums are at the moment so the $10K LMI premium is only indicative."
Hi Prospector
One other option worth considering… Offer the vendor $1000.00 for an extension on your contract.
If they accept, contact one of the brokers on this thread, all of whom have demonstrated that they understand property finance more thoroughly than your present broker. The savings they will gain for you will far outweigh the $1000. You will also benefit from their advice on any future investments. If you continue with your current arrangements, it will make it more difficult to access equity from your properties for deposits on future investments.
You might feel obligated to proceed with your current broker, but consider the fact that their failure to give you quality advice, resulting in potential losses of thousands of dollars and an undeterminable setback to your investing career, releases you from any moral obligation to them, and more than justifies your right to seek quality advice elsewhere.
Cheers,
Tony
I do everything in my power to never pay LMI. So i would use savings – to reduce or avoid. 13k outlay is 13k lost – despite the better leverage. Especially if you have access to the funds now.
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