95% LVR Lenders

[CAFDS]

Hi All,

I am currently making the decision to purchase either 1 or 2 additional IP's after recently revaluing my first IP.

My question is if I were to purchase 2 IP's where my LVR would need to be stretched to 95%, which lenders would be able to accommodate this while still offering a competitive rate along with the desired bells and whistles (Offset, redraw etc).

The purchase price of the new properties would be circa $220k each, with the loans totalling around $200k. Could anyone provide an estimate of the LMI for this type of loan?

Cheers,

CAFDS

 

[Shahin_Afarin]

Few lenders will do 95%. You should look beyond rate and think longer term.

To answer your question - a lender like Westpac would work well because they do 97% (so long as you have 10% equity in existing property) and they do not price on LVR as much as other lenders like NAB and Macquarie do.

You also need to consider that the lender would "approve" a 95% application.

Punters may think its easy to get 95% loans but its not. There is a lot of work involved to get it across the line and often its not guaranteed.

I would consider a longer term strategy particularly if you are purchasing 2 or more properties.

Who is the current lender?

 

[Mick C]

A few points to consider.

1. Is it 95% inclusive of LMI or add lMI on top?
2. 95-97 and even 99% are all possible but once you go past 90 the deal does get a lot hardier and your file needs to be a lot stronger
3. Does your 1st loan have an offset account? if so there's no point applying for a 2nd offset account unless it's your PPOR purchase.
4. Do you have any equity in your 1st property that you can draw down on? and which lender is it with?
5. LMI Quote based on $220k purchase and a straight 95% in NSW/ Full doc ~
$4,700- $7,300

Cheers

 

[Rolf Latham]

sub 300 k 95 % lends are generally worth doing if you have a decent credit score AND you dont want to access equity in the future at 95 % -which isnt impossible but an even greater limitation

at that level the LMI premium and stamps on lmi should be under 3 %.

note most lenders wont allow you to add any of the LMI premium to the loan,some will go to 97 and BWA will add it all

BUt getting a loan approved will not be simple as Sha has stated

ta
rolf

 

[CAFDS]

Thanks for all the feedback gents.

I would be looking for a 95% loan with LMI on top of the loan, and preferably funded by the lender. Also I do not want to cross secure, I have a LOC available for the next purchase.

My preference is to provide a 5% deposit and pay for legals/stamps ontop of that, I've calculated that based on my LOC that if I could get a loan of 95% plus LMI that it should work with an acceptable buffer.

I do not have a PPOR at the moment, still taking advantage of my age and living at home.

 

[Redom]

As others have mentioned, it is definitely possible, but can be difficult to pull through, particularly for investment loans. You'll need genuine savings too (10% equity).

You'll need to have a strong overall file for LVRs that high on investment loans - e.g. near perfect credit history, etc.

Second Rolf's view that Westpac is a good place to look at for something like this. They don't price based on LVR, so you wont be paying a premium and allow you to capitalise LMI (up to 97%).

Alternatively fixing your mortgage is another way to avoid paying interest premiums in the short run.

Cheers,
Redom

 

[Peter_Tersteeg]

For investors, every 95% product I can think of comes with some sort of catch. Often it's not a big deal if you can meet those requirements, but sometimes it can be a deal killer. Some things that come to mind (some of these may not apply to owner occupiers):

* Must have 10% equity in another property - Westpac group.
* Must be an existing lending customer - ANZ.
* Won't capitalise LMI over 95%, you effective borrow about 91.5% + LMI (or worse) - Lot's of lenders (including CBA & NAB).
* Significantly higher interest rates - Lot's of lenders, Westpac group & ANZ are the exceptions here.
* 95% is only for purchases, refinances won't go higher than 90%, equity access also limited to 90% - A select few lenders will allow existing customers to access equity to 95%, but refinances from another lender only goes to 90%.
* LMI premiums almost double for a 95% loan compared to 90% loan, in some cases you borrow an extra $2 and give $1 straight back in extra premiums - Every lender, but some are worse than others depending on other policies already mentioned.
* Assess your application very critically, they look for an excuse to decline the application instead of reasons to approve it - Every lender IMO.

My feeling is that if you're trying to build an investment portfolio based on 95% lends, you're asking for trouble. Often the difference between a 90% and 95% lend is a very small $ amount and only a few months savings.

If you must use a 95% loan, so be it. If however you can get away with a 90% loan and have a little less cash in the bank, it makes things much easier in the medium and long term. People can often find they'll make up the difference for the next purchase fairly quickly anyway.

 

[Oshawott]

You'll need to have a strong overall file for LVRs that high on investment loans - e.g. near perfect credit history, etc.


Cheers,
Redom

Just wondering, what does perfect credit history usually mean.
High veda score? Never had defaults? If any can clarify it a bit more as to what is major factor in saying someone has perfect credit history.

 

[Redom]

Just wondering, what does perfect credit history usually mean.
High veda score? Never had defaults? If any can clarify it a bit more as to what is major factor in saying someone has perfect credit history.

Doesn't necessarily have to be high Veda Score Oshawott, but a very low score is generally a good indication of relatively poor credit history - Vedascores include an element of 'time'. So younger folk tend to have lower scores. This doesn't rule that segment out.

A good history means you've got nothing alarming on it. E.g any sniff of bad behaviour that's recorded on your file, then you could be in trouble (e.g. lots of activity, lots of consumer debt activity, previous defaults, etc).

 

[Jamie M]

* Won't capitalise LMI over 95%, you effective borrow about 91.5% + LMI (or worse) - Lot's of lenders (including CBA & NAB).

Awesome post by Pete as always.

The part I highlighted is so important. There aren't many lenders that will do 95% + LMI deals for IP purchases these days - so it basically become a 92% + LMI deal.

Cheers

Jamie

 

[antistar]

My feeling is that if you're trying to build an investment portfolio based on 95% lends, you're asking for trouble. Often the difference between a 90% and 95% lend is a very small $ amount and only a few months savings.

My thoughts exactly, you might be much better off starting with one good property at 90 or below 90%.

 

[Peter_Tersteeg]

Awesome post by Pete as always.

The part I highlighted is so important. There aren't many lenders that will do 95% + LMI deals for IP purchases these days - so it basically become a 92% + LMI deal.

Cheers

Jamie

It's often worse than this example...

Over $300k you often get less than 92% and for over $500k loans the LMI premiums are often over 4% of the loan amount which means you can effectively get as little as 90.5% + LMI.

This means for a $300k price point, you might find the difference between a 90% + LMI loan and a 95% lend is effectively the bank letting you borrow $9,000 but it also costs about $8,000 extra in LMI premiums.

Not a very favorable cost/benefit ration.

 

[Montoya]

Both my IP's were 97% lend (ie 95% + LMI) 300-400k value per property with RAMS. Our broker worked a small miracle. Sure we could have waited a few more months, but we were lucky to have bought at the right time and now we're better off as the equity gained far outweighs the ridiculous amount of LMI charged. The interest rates aren't bad but not the greatest either. But, the flip side, it's all tax deductible anyway, and both properties are almost cash flow positive at this point.

 

[Redom]

Both my IP's were 97% lend (ie 95% + LMI) 300-400k value per property with RAMS. Our broker worked a small miracle. Sure we could have waited a few more months, but we were lucky to have bought at the right time and now we're better off as the equity gained far outweighs the ridiculous amount of LMI charged. The interest rates aren't bad but not the greatest either. But, the flip side, it's all tax deductible anyway, and both properties are almost cash flow positive at this point.

Well played Montoya - sounds very well thought through (with the benefit of hindsight!)

RAMS are known for a good high LVR policy.

Cheers,
Redom

 

[tobe]

Well played Montoya - sounds very well thought through (with the benefit of hindsight!)

RAMS are known for a good high LVR policy.

Cheers,
Redom

No credit scoring, a fairly good servicing calculator and max LVR of 98.5% for PPOR, max 95% inc LMI for Inv.