Another LMI questions - short term access to funds

[landlord78]

Another LMI question - short term access to funds

Hi All,

I helped a mate buy a house on the weekend in Noble Park at auction. He has got preapproval, but is looking at $8000 mortgage insurance because he only has 8% deposit on a loan of about $330k.

Here is the question: He has access to $50k from a family member for a short period of time. Can he use this to somehow avoid mortgage insurance, then repay the money after the loan has been finalised?

He could also get an extra 50k equity in the house in the next few months by spending around 5k on renovations - I don't know if that helps?

Does anyone know of a bank that has modest LMI fees?

Any advice would be appreciated.

John

 

[Rolf Latham]

Hi John

its a tough one

8 k on a 95 % lend around 300 k is a "modest" risk premium in an environment where the vaks are trending south .

Much depends on how soon the 50 k needs to be paid back, and is the 50 k enough to get to a 20 % deposit after all costs

ta

rolf

 

[Aaron_C]

The LMI fee is the same across all banks because there's only 2 LMI providers. It's hard on a 95% lend cause at that level you may have to show 'genuine' savings - and obviously a loan from a family member is not an example of this.

 

[Marty McDonald]

Too risky to borrow from a friend what if the new Val doesn't stack up.

Cop the lmi is my recommendation for your friend.

There are really only 2 main lmi providers as ACE pointed out but ING self insures for low risk borrowers (2 years permenent full time in same job) which may be a slightly cheaper alternative.

As for lmi being the same I have to disagree. For larger loans between $500k and $600k the difference in lmi between the 2 main lmi providers can be quite large up to $10k in
certain scenarios.

In your mates case it's worth getting a quote from a broker but might nit be much in it.

Sometimes you can manipulate the loan amount by a few hundred bucks to save a grand or two as well.

 

[landlord78]

Thanks for the replies so far. I think he can hold on to the 50k for a few months.

I was thinking last night, he paid 348k for the property (3br house on 623m2), though council values it as 450k on the rates notices.

If the bank valued it as higher the the 348k he paid, does that constitute some kind of deposit/equity/LMI offset?

John

 

[Rolf Latham]

Hi John

Lenders will generally take valuation or contract whichever is lower.

There are exceptions where u can prove a favourable sale usually via a relative

If the actual val is higher, the best way often after purchase is to move valuers and lenders holus bolus, because the existing lender/valuer wont recognise the higher val due to policy

ta

rolf