Hi All
I'm currently organising finance for my 2nd IP purchase. Budget is $450k - $500k.
I'm using equity for my deposit, but to do so, am paying my PPOR mortgage down using cash buffer funds from my offset account. I've narrowed it down to a couple of lenders with the help of my broker and now it's decision time. The question is, by how much do I pay down the PPOR.... and that's where my options/questions lie.
Cash Buffer vs LMI?? The more cash I put down, the less LMI I'm paying. But if I leverage up to 95-97% I'll be looking at quite substantial LMI. My main options are below:
- Keep in mind: Offset balance is approx $105k
Option 1
90% Lend
No LMI
$51k PPOR paydown from cash buffer
Option 2
95% Lend
$14k LMI
$42k PPOR paydown from cash buffer
Option 3
95% Lend
$34k LMI ($14k for 95% on PPOR and $20k for new 95% lend)
$21k PPOR paydown from cash buffer
I understand the aim of the accumulation stage is generally to borrow as much as possible and keep cash levels at a maximum, but where does the trade off point begin between cash buffer and LMI? If there is one at all?
I'm sure a lot of you have faced this same dilemma. If you could give your opinion and also back it up with reasoning it would be very helpful and greatly appreciated.
Cheers!
Jon
I'm currently organising finance for my 2nd IP purchase. Budget is $450k - $500k.
I'm using equity for my deposit, but to do so, am paying my PPOR mortgage down using cash buffer funds from my offset account. I've narrowed it down to a couple of lenders with the help of my broker and now it's decision time. The question is, by how much do I pay down the PPOR.... and that's where my options/questions lie.
Cash Buffer vs LMI?? The more cash I put down, the less LMI I'm paying. But if I leverage up to 95-97% I'll be looking at quite substantial LMI. My main options are below:
- Keep in mind: Offset balance is approx $105k
Option 1
90% Lend
No LMI
$51k PPOR paydown from cash buffer
Option 2
95% Lend
$14k LMI
$42k PPOR paydown from cash buffer
Option 3
95% Lend
$34k LMI ($14k for 95% on PPOR and $20k for new 95% lend)
$21k PPOR paydown from cash buffer
I understand the aim of the accumulation stage is generally to borrow as much as possible and keep cash levels at a maximum, but where does the trade off point begin between cash buffer and LMI? If there is one at all?
I'm sure a lot of you have faced this same dilemma. If you could give your opinion and also back it up with reasoning it would be very helpful and greatly appreciated.
Cheers!
Jon