Capitalising large LMI amounts?

[dredfern]

Hi,

I'm considering a property at an auction around 650K at 90% lend but won't have enough deposit to cover the approx 15K LMI myself.

My question is whether most lenders would have any issues capitalising this much LMI and whether there are limits where they start saying "no" to capitalising the LMI ? (i'm currently with Westpac)

Also are low valuations after auction common or very rare, as I would be scraping the barrel on this one and don't want to risk losing my deposit when I can't cover any shortfalls? (property in moonee ponds)

Thanks!

 

[Peter_Tersteeg]

There are a few lenders who will be willing to capitalise the LMI, but there's very few that will capitalise beyond 95% or 97%.

If your LVR without LMI is 90% you should be fine. Be aware however that there are a few lenders who will increase the interest rate as soon as you borrow more than 90%, so you'll need to select your lender carefully. Westpac will cap LMI without penalty, but I would suggest that there are more cost compeditive lenders in the market - Westpac has been amoungst the most expensive lenders for at least 3 years now.

 

[Aaron_C]

Also are low valuations after auction common or very rare, as I would be scraping the barrel on this one and don't want to risk losing my deposit when I can't cover any shortfalls? (property in moonee ponds)

For a purchase it is unlikely that the valuation will come in lower than what you paid for it because by definition, what you paid for it is market value. However, I have seen bad vals come in on fairly innocuous purchases before so nothing surprises me.

As for LMI capitalisation of $15,000, it can be done no issue as long as the max LVR is below 95/97% and the lender allows it.

 

[dredfern]

Thanks Peter and Aaron!

Yes I was only referring to 90% lends before LMI.

I've just had some bad experiences with LMI last time(less than 4K) where bank says sure we can capitalise the LMI, but then got a call a few days before settlement from broker saying they bank stuffed up and they haven't actually done it. So I had to cover it myself at the last minute in order to settle on time, which I can't afford this time. Maybe I need it confirmed in writing somehow!

Thanks!

 

[Aaron_C]

I've just had some bad experiences with LMI last time(less than 4K) where bank says sure we can capitalise the LMI, but then got a call a few days before settlement from broker saying they bank stuffed up and they haven't actually done it. So I had to cover it myself at the last minute in order to settle on time, which I can't afford this time. Maybe I need it confirmed in writing somehow!

Well that's untrue. The only bank that did not capitalise LMI was ME Bank, but they have just changed that policy. All the majors do it and so do the non-bank lenders.

 

[dredfern]

It wasn't that 'they don't do it', it was that 'they didn't do it' (i don't know why), and I was told we would need to lodge the application over again which I didn't have time for!

 

[Rolf Latham]

Well that's untrue. The only bank that did not capitalise LMI was ME Bank, but they have just changed that policy. All the majors do it and so do the non-bank lenders.

NAB direct is still a non capper, and as PT has pointed out the game changes a little with some lenders in terms of credit score, rate and other tinker stuff where the LVR goes over 90 %

ta
rolf

 

[Peter_Tersteeg]

Well that's untrue. The only bank that did not capitalise LMI was ME Bank, but they have just changed that policy. All the majors do it and so do the non-bank lenders.

NAB does not capitalise LMI, but they will do a 95% lend (so it's not an issue in this case as long as the loan is set up correctly).

dredfern I suspect your previous problem was the broker didn't do their submission correctly, or they did and the bank mis-interpretted. It's actually a very easy problem to come into with Westpac because the seem to do it 'back the front' to most other lenders. We make a point of following up the amounts with all Westpac LMI deals to ensure this problem doesn't occur.

 

[dredfern]

Thanks for the responses!

It's good to know it's doable and that we should be able to circumvent any problems with LMI cap with some following up!

Cheers!

 

[Marty McDonald]

Hi,

I'm considering a property at an auction around 650K at 90% lend but won't have enough deposit to cover the approx 15K LMI myself.

My question is whether most lenders would have any issues capitalising this much LMI and whether there are limits where they start saying "no" to capitalising the LMI ? (i'm currently with Westpac)

Also are low valuations after auction common or very rare, as I would be scraping the barrel on this one and don't want to risk losing my deposit when I can't cover any shortfalls? (property in moonee ponds)

Thanks!

A 90% lend + LMI for a $650,000 purchase woulld put right in the QBE sweetspot. I would serioulsy consider looking at a lender who uses QBE as their mortgage insurer rather than Genworth (ie not Westpac). QBE recently upped their LMI rates but for a loan between $500,000 and $600,000 (before the LMI is capped) it is still a fair bit cheaper to use QBE lenders. $11,000 versus $15,000 and a probably a better % to boot.

 

[MattKenworthy]

Westpac have actually switched to QBE for their >90% stuff as of 2 days ago but still operating on Genworth tiers for some reason so $500k-$600k still much cheaper elsewhere.

 

[Marty McDonald]

Westpac have actually switched to QBE for their >90% stuff as of 2 days ago but still operating on Genworth tiers for some reason so $500k-$600k still much cheaper elsewhere.

Yes quite true, I'm so used to thinking Genworth for them, will take some getting used to. Do you know what happens with top up LMI with them now?

 

[MattKenworthy]

No idea, not something i'm too likely to come across to be honest but would assume for anything not written under Westpac LMI they're going to try and hit the client with the full premium.

 

[tobe]

Yes quite true, I'm so used to thinking Genworth for them, will take some getting used to. Do you know what happens with top up LMI with them now?

they check who wrote the original policy and do the top up thru them, if policy still fits. Or the 'westpac group' does. Recently saw an old 100% loan insurered thru QBE and they agreed to go to 95% on a refi, under the same policy, only charging the top up LMI, where currently we use genworth for above 90% and neither has refi above 90% on their policy, for new borrowers.

 

[Marty McDonald]

No idea, not something i'm too likely to come across to be honest.

You will now Matt


And thanks for that Tobe.