Hi Paul,
I have gone through a similar situation as you, it was a few years ago now but it was also with the NAB. I ended up in the 3 loan situation that Jamie is talking about. So, it definitely can be done if you ask.
In regards to the LMI, I have also discussed this with the NAB. I think that they might be billing you an extra $6000 to take the loan to 100%. Because $6800 is quite low for LMI for a 95%+ LVR on $350k. It could also be that they're giving you this equity via a Line of Credit (higher interest rate), and then probably not cross securitising your loans. But I would be paying particular attention to this!! Like has been said above, I'd do what I did, and end up with 3 separate loans set up how you stated in regards to IO loans etc.
The only other thing I would mention is to be careful what / how you buy, as you'll need the bank's house valuation to be as good as, or higher than the purchase price. Being pre-approved, and only having 10% deposit could be painful if you find the valuation comes in lower than your purchase price!
I'd be interested to know how you go, because I was only chatting to my NAB bank manager the other day. Check out my thread here: https://www.propertyinvesting.com/forums/help-needed/4349433 this was all with the NAB.
Hi Paul
Tread carefully and don't second guess yourself – they will try and convince you otherwise but the fact of the matter is that the advice they are providing is wrong and will cost you in LMI and poor structuring.
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]
Thanks everyone for the advice. The key things that were discussed in the meeting:
1. Regarding LMI, I was told I am not paying the full amount. I am only 'topping up' the existing LMI payment to cover the additional borrowings. Does this add up? does $6800 seem right?
2. I was reassured that it was not cross-collateralised. The IP loan would be an interest only loan independent of the home loan but within the same 'choice package'.
3. I was reassured that it was typical practice to award the full amount of the equity. I explained that I thought the banks would only recognise a percentage of the equity to cover themselves if the market drops or the valuation was inaccurate. She looked at me like I was speaking latin.
4. I queried about the 3 loan structure, and againn, she looked at me peculiarly. She advised that the equity was not a loan, but it was 'security' for the bank to secure the addtional loan.
Hi Paul,
I'm still very new, so definitely take my advice with less weight than others, but to answer:
1. Yes, that sounds exactly right. It's what I thought was the case in the first place. I was quoted (for QLD) for $6800 for 90% LVR on $350k, so to go to 100% would be much higher than that.
2. I would ask what interest you're paying on the 'equity', unless they're doing a brand new mortgage with a 100% loan then I don't get it. Are you getting 5.08% with the choice package? That's what I got. How are you pulling out the 'equity' to know that it's tax deductible – I'm pretty sure that it is? If it's on the same loan, how do you calculate it? Being in it's own loan is way easier for this. Make sure the $395 for the package is taken out of the investment loan, so it's deductible.
3. I had this conversation with NAB only 8 days ago, and I was told I could only get 95% LVR and the LMI was ridiculous for a $600k loan. I was never told that 100% was possible. I would be really concerned about this lady at this point. Maybe consider a phone consult, I haven't had trouble with them.
4. I would just push for the 3 loans, check my thread I posted a few posts back in here for the link. There is no extra cost with the Choice package in having additional loans.
I'm pretty well embedded with NAB, but if you're not, maybe you should consider moving banks…. there are probably some brokers here keen to have a chat.
The NewGuy:
1. agreed
2.Now my understanding from the meeting was that I don't pay interest on the equity. Why would I pay interest on money that is essentially already mine (i.e. not borrowed)? The way I see it is that the equity is already mine; I am using it to pay a deposit and cover fees on another loan.
Yes we are paying 5.08%
The $395 fee was already paid at the commencement of my home loan.
3. The IP loan would be at 90%LVR therefore I am incurring the $6800 LMI.
4. See point 2. I dont see how a third loan is justified?
The more I think about this, the more I am getting confused. Let me lay out the figures…
PPOR Value: $400,000
PPOR loan balance: $310,000
Equity @ 90% of PPOR value: $50,000
Pre approved loan: $350,000
LMI: $6800
Can someone make sense of this?
Paul B. wrote:The NewGuy:1. agreed
2.Now my understanding from the meeting was that I don't pay interest on the equity. Why would I pay interest on money that is essentially already mine (i.e. not borrowed)? The way I see it is that the equity is already mine; I am using it to pay a deposit and cover fees on another loan.
Yes we are paying 5.08%
The $395 fee was already paid at the commencement of my home loan.
3. The IP loan would be at 90%LVR therefore I am incurring the $6800 LMI.
4. See point 2. I dont see how a third loan is justified?
Paul,
You will have to pay interest if you use your equity. It is not your money it is the banks. If you lend me $10 and I pay you back $4, doesn't make that $4 mine, If you were kind enough to let me take that $4 back again I would still owe you.
Don't mean to sound harsh but it really seems like the blind leading the blind in regards to your banker. You would be mad not to take advantage of one of the top brokers that have already commented. Normally won't cost you a thing! I have been in your shoes and I wish someone told me when I started out!
Goodluck.
Talk to Jamie, don’t waste your time with the banks. I’ve learnt the hard way. They will set up the loan to benefit them not you.
Yeah I may have to swallow my pride and seek help. Thanks for the interest guys!
Hi Paul. Good luck, and let us know how you go. I'm definitely interested to know what happens, particularly if you stay with the NAB.
Also, the $395 fee is per annum, so if you do stay make sure you get it put on a tax deductible account.
Don't think of it as swallowing your pride Paul – think of it as making a smart decision to surround yourself with seriously clever people who know their stuff. Leveraging their abilities will take you far
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
TheNewGuy wrote:Hi Paul. Good luck, and let us know how you go. I'm definitely interested to know what happens, particularly if you stay with the NAB.Also, the $395 fee is per annum, so if you do stay make sure you get it put on a tax deductible account.
Oh my mistake. Excellent advice. Cheers
I will let you know how it goesJacM wrote:Don't think of it as swallowing your pride Paul – think of it as making a smart decision to surround yourself with seriously clever people who know their stuff. Leveraging their abilities will take you farThanks Jac.
JacM wrote:Don't think of it as swallowing your pride Paul – think of it as making a smart decision to surround yourself with seriously clever people who know their stuff. Leveraging their abilities will take you farAbsolutely. There's an old saying in business; spend more time 'on' the business rather than working 'in' the business. Broking is a discipline that is detailed, complex and requires a certain amount of skill. It takes years to acquire that skill experience and knowledge especially related to property investing.
Smart business people learn to leverage the technical skills and abilities of their investing team while they focus on more productive activities. Successful business leaders are good at delegating responsibilities to those with the best chance of positive outcomes. They don't try and do everything themselves.
A motivated individual with a good team will out-do an individual trying to do it mostly by themselves by a substantial stretch.
So I found out my partner's friend from school is a successful mortgage broker and got some great advice.
NAB came to the table with a very competitive rate of 4.92% for our PPOR loan (previously 5.08%) and the Investment loan (variable IO)
Structured as follows:
Loan 1: $310,000 (PPOR, P&I)
Loan 2: $50,000 (Deposit, IO)
Loan 3: $297,000 (Investment Property, IO)
This is assuming a purchase price of $330,000 on investment property.
I will let you know how it goes
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