Finance

[WebBoard]

From: Mike .


what to do ?
From: kjm
Date: 05 Feb 2001
Time: 16:26:21

Have $ 80 000 deposit saved up. Would appreciate ideas for investing preferably Sydney market . Other markets may be of interest. Cash flow and Capital gain both are desired. Any ideas would be appreciated. Thanks

 

[WebBoard]

Jeremy

Reply: 1
From: Mike .


Is this specific enough??
From: Jeremy
Date: 05 Feb 2001
Time: 22:52:04

Only buy 10% down I/O. Pay the M Ins. Ring Ian (Murray Douglas RE) in Mt Druitt. Tell him I sent you (should be getting used to that by now) Buy everything he has <120,000 Buy me several beers, Mont Blanc watches etc - be creative please I appreciate surprises - in a year or so when you have doubled your initial outlay

 

[WebBoard]

Rolf

Reply: 1.1
From: Mike .


Re: Is this specific enough??
From: Rolf
Date: 05 Feb 2001
Time: 23:37:30

Hi Jeremy

If you are going to pay LMI, why not take it to the max and go to 95 % ? The premium is not that much higher and if the serviceability is there then this would allow even more IPs to be purchased.

Regards, Rolf

 

[WebBoard]

Jeremy

Reply: 1.1.1
From: Mike .


Re: Is this specific enough??
From: Jeremy
Date: 06 Feb 2001
Time: 14:50:02

Maybe I am a little out of date, where can you get 95% LV on IP from? Esp with more than one? I would like to know if this is possible! What dollar limit would they place on that? In my experience you can only get away with 10% down up to about $800k. As we have only five Mortgage Insurers (and the cheeky buggers talk!) I have found a 'limit' at theoretically 5* 800K although I doubt you would get it that far without 20% down. (Also for others reading this cross collaterilisation works well up to $1m. Try to seperate beyond that, it kills your L/V!) WhatchareckonRolf??

 

[WebBoard]

Rolf

Reply: 1.1.1.1
From: Mike .


Re: Is this specific enough??
From: Rolf
Date: 06 Feb 2001
Time: 20:25:56

Hi Jeremy

Its not so much that the cheeky buggers talk, it is that everytime you apply for ANY finance there is an entry on your CRAA record showing who you have applied to and how much for, but not whether you were approved or indeed you used the credit. I always advise my "financially active" clients to obtain a credit reference report before applying for finance so that we know where the holes may be.

I would not nec. disagree with your points of view, minor exceptions - ANZ will do 95 % AND allow capitalisation of LMI premium, so effectively to 96/97 % (some minor lenders will too I have heard) .

This means that a first home buyer in NSW can effectively buy a 200 k property on 10 K total input + a bit for conveyancing and app fees, and then get 7000 back from FHOG.

I have never tried to go beyond the 600 k total mark with client deals so I can't comment on your 800 k glass ceiling. Makes sense though that the LMI people would like to limit (perhaps eliminate) their risk of a claim and at 800k they would like more hurt money.

Still I have found that lenders and LMI will look at very high lends deals on an exception basis if all else stacks up, especially as part of a large broker group since we might take our bat and ball and go elsewhere.

My motto is that if you can handle it emotionally and financially, gear to the max using whatever tools you need.

So yes its possible but perhaps unlikely at the volumes you're talking about.

Ta - Rolf

 

[WebBoard]

Jeremy

Reply: 1.1.1.1.1
From: Mike .


Re: Is this specific enough??
From: Jeremy
Date: 06 Feb 2001
Time: 21:40:07

My CRA is updated every quarter. I have been surprised at some things that are not on there! And they do so too talk!!! I have received enough information from separate insurers through different banks to know that they do! Same wording of obscure things they have come up with, adding each others reasons to their own. When you mention which insurer has previously said exactly the same thing, you get a stunned silence. Nothing you could prove, but I am convinced they do. I probably would in their situation too!

Thanks for the ANZ tip. I am with W/PAC and get separate 10%'s up to 6-800k then they seem happy with 15%, which I think all round is a fair thing. When you get down to it, it really isn't a bad thing having a little equity is it? Just have to get creative with Co names!

 

[WebBoard]

DR

Reply: 1.1.1.1.1.1
From: Mike .


Re: Is this specific enough??
From: DR
Date: 07 Feb 2001
Time: 19:47:07

LMI is limited to a value of around 500k when cross collateralising property.

The limit on LVR is set at 90% for IO loans. Anything over that (90.01% LVR) has to be debt reducing and P and I.

Hope that helps.

Cheers, DR (trust me I am a doc...... )

 

[WebBoard]

Pierre

Reply: 1.1.1.1.1.1.1
From: Mike .


Re: Is this specific enough??
From: Pierre
Date: 07 Feb 2001
Time: 20:42:20

Notr true DR. Rolf speaks the truth regarding ANZ. I have an IO load with them financed to 95% contract price plus they capitalised the LMI and a couple of other costs - all up, over 95% IO. It can be done!

 

[WebBoard]

Rolf

Reply: 1.1.1.1.1.1.1.1
From: Mike .


95 % + LVR Interest Only Investment Loans
From: Rolf
Date: 07 Feb 2001
Time: 22:19:25

Hi Pierre

Thanks for the vote of confidence - I have just come in from signing up another high lend investment loan. Will be ~ 97 % by the time LMI is added. AS I keep saying though these deals have to be pretty much air and water tight and generally with cumulative totals of less than 500 k.

Off the record, because the banks hate it but, Any savy broker will also rebate part commisions on these type of deals and thereby push the effective LVR to near/ over 98 %.

Regards, Rolf

 

[WebBoard]

Crystal

Reply: 1.1.1.1.1.1.1.1.1
From: Mike .


Re: Is this specific enough??
From: Crystal
Date: 06 Feb 2001
Time: 21:42:31

Hi DR,

I have just received approval for a 5% deposit interest only loan!

Regards, Crystal

 

[WebBoard]

Rolf

Reply: 1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: Is this specific enough??
From: Rolf
Date: 07 Feb 2001
Time: 10:57:01

Thanks Crystal

It shows what can and can't be done is mainly a matter of how much YOU want it done and who is on your side. These deals have to be generally very water and air tight.

DR is about 98 % in the right ball park though, most "talking to the wall" lenders will insist you take P&I, and I tell my clients to insist to take their biz elsewhere.

Ta - Rolf

PS

On the issue of LVRs etc, there are now products where you can get 90 % LVR without proof of savings history for Owner occupier, Construction and Investment Loans (but no I/O) . You can borrow the deposit or use your FHOG (if you qualify of course) etc.

Some qualification criteria but pretty basic. Come and get it !

 

[WebBoard]

JeffM

Reply: 1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: Is this specific enough??
From: JeffM
Date: 07 Feb 2001
Time: 08:24:38

May I ask where?

What was the specifics of the deal?

At what rate?

Thanks - we should share this info

 

[WebBoard]

Crystal

Reply: 1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


95% LVR with Interest Only Repayments
From: Crystal
Date: 07 Feb 2001
Time: 20:18:15

Hi Jeff,

Homepath @ 7.15% (minus 1/2 percent!!) Try http://www.yourmortgage.com.au and do a search for investment home loans in the *Today's Rates* section. Each lender has criteria such as LVR and type of repayment (ie io/p&i) etc. I applied for a loan with the lender with the lowest interest rate, 95% LVR and interest only facility.

Hope this helps.

Regards, Crystal

 

[WebBoard]

Rolf

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: 95% LVR with Interest Only Repayments
From: Rolf
Date: 07 Feb 2001
Time: 22:09:01

Ouch That hurts, am I reading right your rate is 7.15 minus today's .50 drop for an i/o 95 % investment loan. If this is right I think I might pack up my brokers kit bag - only kidding.

In case you did not know homepath is a Commbank subsidiary (i think) targetting people just like you - those than are tech savy, know what they are looking for and therefore get a good discount.

Rolf

 

[WebBoard]

Pierre

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Dealing through Homepath
From: Pierre
Date: 09 Feb 2001
Time: 19:13:59

Homepath can provide a reasonable deal, but like all lenders, I found they had to be massaged a little to get what you want. You need to apply online, and their application form is pretty basic - well suited to a first home owner or first IP buyer. For those of us who like to present more of a detailed financial case to the bank, the Homepath form is too limiting. However, as always, there are ways around this.

Homepath will accept faxed or emailed financial statements and other information backing up your application. You can ring them up and talk them through your application as well. If you can get past some of their limitations (technology limitations), then you may be able to get a reasonable product through them.

 

[WebBoard]

DR

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Mortgage Insurance
From: DR
Date: 10 Feb 2001
Time: 12:56:35

Hi Crystal,

That's great.

How did you manage this as most traditional lenders wont do this?

Perhaps you can tell us "where did ya get it ?"

What sort of expense is the mortgage insurance on a 95% IO loan. I know my lender looks at about 2%.

In other words if you borrow 95% of 200k then the mortgage insurance is 200 * 95% * 2% = $3800.

If you drop this back to a 90% borrow then the rate drops to 1.2-1.4% ie 200 * 90% * 1.2% = $2160

So, you can see that mortgage insurance is a fairly important consideration.

Thanks, DR

 

[WebBoard]

Rolf

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: Mortgage Insurance
From: Rolf
Date: 10 Feb 2001
Time: 19:04:10

Hi DR

Sorry to butt in, I have just been through the exercise with a "surprised" client - "what!..the insurance only protects the lender if they lose and not me ? "

Cost Depends on LMI provider and amount borrowed.

I/O loans to 300 k generally 2.5 % + s/duty
I/O loans to 300 to 500 generally 3 - 3.5 % + s/d

If you are wondering about the cost of Stamp duty on the premium - not much less than GST depending in the state you are in 8 - 11.5 %.

so you are not wrong about LMI cost being an important consideration !. If it gets you in versus not, I would pay LMI everytime (assuming of course you are buying in a growth area.)

How does this compare to your LMI costs Crystal ?

Regards, Rolf

 

[WebBoard]

Crystal

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: Mortgage Insurance
From: Crystal
Date: 10 Feb 2001
Time: 22:17:29

G'day,

LMI = $1898

Loan Amount = $140555

LMI is just another evil expense for me when purchasing IPs because I am not willing to wait until I have a 20% deposit!!!

Regards, Crystal

 

[WebBoard]

DR

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: Mortgage Insurance
From: DR
Date: 11 Feb 2001
Time: 06:44:27

Crystal,

You have a purchase price of around 148k.

80% is 118k

So you are paying $1898 to get an extra ($140555-118500) $22055.

I would consider this money well spent for an extra 22k considering the mortgage insurance is tax deductible

Cheers, DR

 

[WebBoard]

GerardC

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: 95% LVR with Interest Only Repayments - Crystal & Rolf
From: GerardC
Date: 08 Feb 2001
Time: 09:56:05

Bear in mind that Crystal's loan is a variable interest rate - ie rates go down and then they go back up again! The best 5 yr fixed interest IO loan that I could find was 6.99%. Cheers.