Advice please - capitilising LMI

Hi all,

Firstly, thankyou to everyone who contributes to the wealth of knowledge in these forums - I have been madly reading since I first came across Somersoft!

My situation is this - my husband and I are looking to purchase a property in the ACT. We have $25,000 saved currently, and have access to some grants through the ADF, totaling approximately $25,000. In order to access one of those grants, we are heavily restricted to the lenders available and none of them will go over 95% total loan. Unfortunately, we are ineligible for the first home owners grant as I have previously owned property.

We are looking to purchase a 3 bedroom property in the Gungahlin area around the $480,000 - $500,000 mark, but are confused about LMI. We know that we have two options - we pay for it upfront in cash (which by my calculations we just dont have right now), OR we capitalise it onto the loan.

Can somebody please advise how much can we borrow taking into account our current savings ($50,000 including ADF grants) and IF we can even capitalise LMI onto a '95% in total' loan??? I realise that we also need to use some of that $50,000 towards stamp duty as well.....

Any guidance and figures around what we can realistically look buy at will be appreciated. Thank you all!
 
It looks tight, but you actually might be able to hit the 480k purchase range depending on a few factors. Are the grants available to be paid at settlement? I'm assuming you would be restricted to NAB or the Defence CU for borrowing?

This is assuming serviceability and all other factors line up. :)
 
Thanks for your reply CJay - that is great news:)

Yup - we are limited to NAB, ADCU and DEFCREDIT due to the DHOAS grant.I have spoken to reps from both HPAS and DHOAS and they said as long as paperwork is in the grants *should* be available at settlement. I think we might have a month or so breathing room anyway as stamp duty is not payable immediately in the ACT.... I think.

BTW, we also have excellent serviceability as we are now completely debt free and able to save $2000 a FN. We will also receive the DHOAS monthly repayment grant on top of this as well.

We would love to get into our own place ASAP however I'm not sure on the capitalising the LMI part given our loan would already be 95%, which is the limit for these lenders....
 
Thanks for your reply CJay - that is great news:)

Yup - we are limited to NAB, ADCU and DEFCREDIT due to the DHOAS grant.I have spoken to reps from both HPAS and DHOAS and they said as long as paperwork is in the grants *should* be available at settlement. I think we might have a month or so breathing room anyway as stamp duty is not payable immediately in the ACT.... I think.

BTW, we also have excellent serviceability as we are now completely debt free and able to save $2000 a FN. We will also receive the DHOAS monthly repayment grant on top of this as well.

We would love to get into our own place ASAP however I'm not sure on the capitalising the LMI part given our loan would already be 95%, which is the limit for these lenders....

If you're providing 25k + 25k in grants available, you should be able to effectively keep the LVR below 95% and cap from there. The more savings you have for a buffer the better, but as long as the defence grants are allowable contributions the LVR limits can be kept in check.
 
Given that your serviceability is ok, you should be very close to making it work. Just breaking down what CJay has already mentioned:

On 500K, stamp duty in the ACT will be approximately 16k. Meaning you'll have 34k to go towards the loan, taking the base LVR to 93.2%. At this LVR, you're LMI will cost ~16k, but can be capitalised. f you capitalised this, the total LVR will go above 95% (around 96.5%).

At 480k, running through the same process, you total LVR with LMI is slightly over 95% (95.8%).

On another note, Gungahlin's a growing, family friendly area. It seems to be popular at the moment, I have a couple clients in the middle of purchases there. On very limited evidence, doesn't seem like the Budget has slowed Gungahlin down.
 
Don't know if I can agree with Gunghalin being a booming area.

There's generally a lot of overpriced, new (or newish) stock in Gungahlin and the surrounding burbs.

Any particular reason you're focusing on Gunghalin? There's nothing wrong with the area per se - but you could possible get more bang for your buck elsewhere.

Cheers

Jamie
 
I definitely don't think its booming - relatively bearish on all of Canberra, bar maybe the Foreshore where I think prices can still inch forward in this market.

Noting that, relative to the Woden inspections I've been to recently, the ones up in Harrison have got quite a lot of attention (admittedly its NRAS stock). Outside of that limited pool of stock, I'm not sure the market can sustain the glut of new stock in Mitchell/Harrison.

But from the people I've met who do live out that way, I get a pretty consistent message that its a good place to raise a family. :)

Don't know if I can agree with Gunghalin being a booming area.

There's generally a lot of overpriced, new (or newish) stock in Gungahlin and the surrounding burbs.

Any particular reason you're focusing on Gunghalin? There's nothing wrong with the area per se - but you could possible get more bang for your buck elsewhere.

Cheers

Jamie
 
Just curious, where would you recommend in Canberra Jamie?

Any particular reason you're focusing on Gunghalin? There's nothing wrong with the area per se - but you could possible get more bang for your buck elsewhere.

Cheers

Jamie
 
MANY thanks everyone for being so helpful!

We like Gungahlin - we have lived in this area for four years and really like what it has to offer - most importantly the 'great for raising a family' aspect too :)

We would like to buy sooner rather than later as my husband will likely be posted out of Canberra in the next 18 months - and we have to live in the property for 12 months to meet the conditions of DHOAS and HPAS.

One more question - can we partially capitalise LMI, and pay cash for the rest? Ie, capitalise up to the 95% total, then pay cash for anything over and above that?

Thanks again everyone!

(I'm sure I will be back with lots more questions soon....)
 
One more question - can we partially capitalise LMI, and pay cash for the rest? Ie, capitalise up to the 95% total, then pay cash for anything over and above that?

Thanks again everyone!

(I'm sure I will be back with lots more questions soon....)

not with NAB , can be an expensive way of doing it their way,BUT then that subsidy you get, you get that for loan duration vs the LMIpain is once off

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Instead of paying the LMI, you can pay down the base LVR. This will reduce the LMI cost, albeit marginally. Pay as much as you need to to bring down the total LVR to 95%.

MANY thanks everyone for being so helpful!

We like Gungahlin - we have lived in this area for four years and really like what it has to offer - most importantly the 'great for raising a family' aspect too :)

We would like to buy sooner rather than later as my husband will likely be posted out of Canberra in the next 18 months - and we have to live in the property for 12 months to meet the conditions of DHOAS and HPAS.

One more question - can we partially capitalise LMI, and pay cash for the rest? Ie, capitalise up to the 95% total, then pay cash for anything over and above that?

Thanks again everyone!

(I'm sure I will be back with lots more questions soon....)
 
...I think we might have a month or so breathing room anyway as stamp duty is not payable immediately in the ACT.... I think.

No, stamp duty in the ACT is payable before settlement (1 minute is good enough :D if you can convince your conveyencer/solicitor to leave it to that point). At any rate, it's before settlement so make sure all your ducks are lined up.

I'm in pre-settlement phase right now for a new PPOR (Woden area).
 
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No, stamp duty in the ACT is payable before settlement (1 minute is good enough :D if you can convince your conveyencer/solicitor to leave it to that point). At any rate, it's before settlement so make sure all your ducks are lined up.

Stamp duty can be delayed but they charge an 8-10% penalty interest P/a
Also the Bank will want to see funds to complete anyway.
 
No, stamp duty in the ACT is payable before settlement (1 minute is good enough :D if you can convince your conveyencer/solicitor to leave it to that point). At any rate, it's before settlement so make sure all your ducks are lined up.

I'm in pre-settlement phase right now for a new PPOR (Woden area).

Spot on.

Unless you qualify for deferred duty - then you have years to repay it (but it seems as if the OP doesn't qualify).

Congrats on your new PPOR mcarthur. It's a good time to be a buyer :)

Cheers

Jamie
 
Oh - thanks guys for all the advice re stampy duty being payable before settlement.... unless we want to pay interest - which I definitely dont. Glad I posted here!

Hmmmm, I guess our options are then to either keep saving for another couple of months or purchase with delayed settlement (say 60-90 days) in order to get funds together to pay the deposit, stamp duty and LMI.

Thanks again, you guys are champions!
 
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