All Topics / Help Needed! / LMI

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of SimonSimon
    Participant
    @simon1313
    Join Date: 2017
    Post Count: 59
    February 24, 2017 - 10:50 pm

    Hi Guys

    I am interested to know what opinions the board has on LMI. If you are just shy of the 88% LVR mark would you put in the extra cash to keep LMI down? Or to you think it’s better to cop a few extra thousand on the loan to keep the cash in your pocket, specifically for renovations?

    I am undecided on this as I see benefit in both, however, I am leaning towards the benefit / immediate gains of having the $ to reno etc outweighing the very minor difference in repayments on IO?

    Am I off the mark here?

    Thanks

    S

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    February 25, 2017 - 5:12 am

    If you can’t come up with a 12% deposit then cop the LMI and move on.

    Tax deductible over 5 Years or the Term of the loan which is the lesser so you end up getting a portion back.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416
    February 25, 2017 - 10:58 am

    Hi Simon,

    Or do you think it’s better to cop a few extra thousand on the loan to keep the cash in your pocket, specifically for renovations?

    Short answer is “Yes!” – the risk level rises a bit, but a good reno uplifts the Equity, and likely allows an increased rental too. An extra few thousand of LMI costs little on a week-to-week basis. e.g. let’s say LMI was $3k more than expected (as you went over the 88% mark). At today’s rates (say 5%), $3k extra is $150 a year ($3 a week) in Interest.

    Instead of keeping the LMI lower (and maybe needing you to take out a small Personal Loan for the renos), you keep your cash and pay a token amount for the privilege. The one caveat would be that the Mortgage Lender will be keeping a closer eye on you than on someone at 88% – but if your Income is stable and all payments are met on time, this is not likely to be a big issue.

    Benny
    PS all just my opinion – no advice there !! ;)

    Profile photo of SimonSimon
    Participant
    @simon1313
    Join Date: 2017
    Post Count: 59
    February 25, 2017 - 11:27 am

    Hi all & thanks to Benny & Richard for the feedback.

    It all makes sense in my head, it is great to have a platform to share those thoughts & hear the “opinions” ;) & experiences of others.

    I am of course somewhat nervous going into my first buy. Looks like we should agree on a number over the next couple of days well below valuation that should see this one set me up for the next quite quickly.

    Cheers guys.

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    February 25, 2017 - 3:41 pm
    Simon wrote:

    I am undecided on this as I see benefit in both, however, I am leaning towards the benefit / immediate gains of having the $ to reno etc outweighing the very minor difference in repayments on IO?

    It depends on what you’re aiming to achieve.

    I work mainly with investors – and a lot of them (particularly those starting out) leverage at 88% + LMI. The LMI is deductible and they can borrow more with less which enables them to be more aggressive with property acquisition.

    If you’re looking to hold onto cash for renos – then work out what the end value will be after the renos. That will help work out whether the LMI cost is justified.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    February 25, 2017 - 6:03 pm

    I think generally avoid it if you can, especially for the main residence loan.

    But it depends on your circumstances. Seek specific advice from a broker.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282
    February 26, 2017 - 5:59 pm
    Simon wrote:

    think it’s better to cop a few extra thousand on the loan to keep the cash in your pocket, specifically for renovations?

    Impossible to answer, I reckon.

    It depends on how much cash you have, how much the Reno will cost, how much more will the LMI cost, how much you want to have in cash for a rainy day (should one arrive) etc.

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of SimonSimon
    Participant
    @simon1313
    Join Date: 2017
    Post Count: 59
    February 26, 2017 - 10:48 pm

    Thanks Guys

    I have passed on the reno property & i’m now looking at property’s at a lower price point so the issue resolved itself.

    Cheers

    S

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282
    March 2, 2017 - 3:03 pm

    Thanks for letting us know.

    For the benefit of all, here is a good post detailing what I think about LMI 👍😎

    • This reply was modified 7 years, 9 months ago by Profile photo of Ethan Timor Ethan Timor.

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

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