Thanks very much for this PT_Bear. I have always been very resistant to LMI but I can see your point and will certainly take this suggestion on board.
Finding it hard to get finance
- Thread starter MissHoney
- Start date
Thanks very much for this PT_Bear. I have always been very resistant to LMI but I can see your point and will certainly take this suggestion on board.
It was Westpac, through a broker though. They will only lend the 80% and we have to use our cash for the balance.
Anyway, I'm having second thoughts about going with this loan. Our present loans are cross-collateralised and after speaking with our bank today we apparently have lots of room to move and more equity that I originally thought.
At the moment I think it is decided that we will offer 270K for the pair of properties (bonus is that they are on 2 titles an not one as I originally thought). We can go through our original bank and the new loan will be cross collateralised with the other 2 properties. We only have to use cash for the SD and legals.
The bonus is that we can still borrow another 220K for the interstate property we are thinking lots about. We won't have to pay LMI at this stage.
The only down side is that all our money including cash savings is with the ONE bank, and as mentioned above, the loans will be cross-collateralised. I know some people see this as a bit risky but it does mean we don't have to use our own cash. Plus we can ask for a partial discharge to get titles back as the cash flow increases.
Thanks for all the input...I'm still reading...
Just to let you know so as not to be confusing (I'm doing a good job at confusing myself!!!) we did both...paid down the loans from another property sale and prepaid this year's interest.
I think if you do the math, you'll find that you're probably better off paying the LMI and getting the full discount
From memory Westpac locks you into the variable products for a particular timeframe, you may not be able to get a fixed rate.
Just a query about LMI. When I spoke with the bank today they informed me that LMI would apply to our total portfolio of loans. E.g., if the total lend for all properties financed was 500K we would pay LMI on the total...I guess this supports paying LMI if going with a separate bank.
This is one of the major disadvantages of cross-collateralisation and in my opinion if someone suggests X-coll they're probably not doing you any favours. If your properties were separated, you'd only pay LMI on a single loan, not the whole lot.
If you've got the time, this might actually be a good time to remove the X-coll and clean things up rather than make them more messy.
I think if you do the math, you'll find that you're probably better off paying the LMI and getting the full discount
From memory Westpac locks you into the variable products for a particular timeframe, you may not be able to get a fixed rate.
Thanks PT. In my case it worked out cheaper on the 40bps instead of LMI as it was for a construction and managed to convince valuer to lend on full build quote. The LMI would've been assessed on the full project val as opposed to keeping the land separate which is still getting 70bps. Will go back to 70bps on completion after revals. But I dont recall any restrictions on my variables.
That is true. X-coll will only make it harder.
Thanks guys for that. I'll check it our with the original bank to see if for this loan of approx 270K we can have it financed separately and pay LMI on it...
By the way, what do you think of the return:
-I have offered 270 K (a pair of 3 bedroom houses, on separate titles: vendors have held for 7 years, now divorced and I think seeking to cash in). We won't know for another week if they will accept the offer. According to the agent, "He probably won't accept 270 but he has to talk to his ex-wife who's on holidays for another week". I'm taking this as 'your in with a good chance'.
-Present rent is 160 and 170 per week but leases up in late Jan and there is potential to increase rent by $5-10 per week on each property (so a total of $340 per week).
A similar pair of houses a few doors away sold a few weeks ago for 330K (but this pair had a very unusual and appealing fascade).
The houses can be improved by polishing boards, new paint, new blinds/shutters, cheap cleaning up of kitchen and bathroom areas (restumping, exterior painting, garden fix up -inevitable at some point). I.e., lots of room for improvement but they are very liveable at present and desireable for uni students.
thanks all for the really useful input.
By the way, what do you think of the return:
-I have offered 270 K (a pair of 3 bedroom houses, on separate titles: vendors have held for 7 years, now divorced and I think seeking to cash in). We won't know for another week if they will accept the offer. According to the agent, "He probably won't accept 270 but he has to talk to his ex-wife who's on holidays for another week". I'm taking this as 'your in with a good chance'.
-Present rent is 160 and 170 per week but leases up in late Jan and there is potential to increase rent by $5-10 per week on each property (so a total of $340 per week).
A similar pair of houses a few doors away sold a few weeks ago for 330K (but this pair had a very unusual and appealing fascade).
The houses can be improved by polishing boards, new paint, new blinds/shutters, cheap cleaning up of kitchen and bathroom areas (restumping, exterior painting, garden fix up -inevitable at some point). I.e., lots of room for improvement but they are very liveable at present and desireable for uni students.
thanks all for the really useful input.
Maybe i am just more conservative, but i think you should be VERY careful of buying additional property until your average LVR on the whole portfolio (including any new potential purchases) is below 80%.
You should always have a buffer to protect yourself from unforeseen factors.
Just look at those people who were exposed to the sharemarket prior to 2008.
Those that had strong risk mitigation strategies inplace prior to 2008 would have had a higher chance of keeping their wealth intact. Many of those who didnt have been wiped out.
You should always have a buffer to protect yourself from unforeseen factors.
Just look at those people who were exposed to the sharemarket prior to 2008.
Those that had strong risk mitigation strategies inplace prior to 2008 would have had a higher chance of keeping their wealth intact. Many of those who didnt have been wiped out.
The unimaginable happens with shocking frequency. Current unimaginables :
1. Property is not at higher price in 10 years time
2. One loses one's job and cannot find another one for more than 6 months
3. Place untennanted for a month or two. Or OMG the utterly unimaginable : rents go down !
Obviously impossible ! Well, it's a lot easier to imagine and possible when it happens.
There are lower risk times for gearing in every cycle. This may not be one of those low risk times.
