A question for the many experienced brokers on here. Partner and I are looking to purchase a block of land inner city for $450k max, ideally with a 95% plus capped LMI (as we only have $45k cash available for the deposit), and then selling our current PPOR to build on the block to become the new PPOR. Sale of the new PPOR will release at least $80k cash, which will be the deposit on a $400k build (20% deposit).
I?ve been speaking to a broker and he stated we?d be up for ~$15k LMI on the land purchase, and therefore suggests we go for a 90% loan instead, pulling $20k equity out of current PPOR to use as a deposit and bring the LMI down to $8k. Great, save $7k. My concern is doing that would mean we have $20k less in cash on the sale of the PPOR and therefore less of a deposit/contingency for the construction component of the loan later.
Correct me if I?m wrong but upon signing a fixed price building contract, the bank will re-calculate LMI based on total loan amount (land + build) and then subtract the LMI already paid. So based on my calculations below, the only real difference is that the total LMI is paid up front, rather than ?staged? and I?d also have more cash available in the lead up to the build under a 95% lend on the land.
Option 1 ? 95% lend on land
Land ? 450k
Costs - $21k
LMI - $15k
Deposit - $44k
Land Loan $442
Cash after PPOR sale - $80k
Build cost - $400k
Build loan $320k.
LMI topup after recalculation ? Nil?
Total Loan - $762k
Total asset value - $850k / 89.6% LVR
Option 2 ? 90% lend on land
Land ? 450k
Costs - $21k
LMI - $8k
Deposit - $66k (using cash plus $20k equity)
Land Loan $413
Cash after PPOR sale - $60k
Build cost - $400k
Build loan $340k.?
LMI topup - $6k
Total Loan - $759k
Total asset value - $850k / 89.2% LVR
Are there any other showstoppers with going with a 95% lend?
I?ve been speaking to a broker and he stated we?d be up for ~$15k LMI on the land purchase, and therefore suggests we go for a 90% loan instead, pulling $20k equity out of current PPOR to use as a deposit and bring the LMI down to $8k. Great, save $7k. My concern is doing that would mean we have $20k less in cash on the sale of the PPOR and therefore less of a deposit/contingency for the construction component of the loan later.
Correct me if I?m wrong but upon signing a fixed price building contract, the bank will re-calculate LMI based on total loan amount (land + build) and then subtract the LMI already paid. So based on my calculations below, the only real difference is that the total LMI is paid up front, rather than ?staged? and I?d also have more cash available in the lead up to the build under a 95% lend on the land.
Option 1 ? 95% lend on land
Land ? 450k
Costs - $21k
LMI - $15k
Deposit - $44k
Land Loan $442
Cash after PPOR sale - $80k
Build cost - $400k
Build loan $320k.
LMI topup after recalculation ? Nil?
Total Loan - $762k
Total asset value - $850k / 89.6% LVR
Option 2 ? 90% lend on land
Land ? 450k
Costs - $21k
LMI - $8k
Deposit - $66k (using cash plus $20k equity)
Land Loan $413
Cash after PPOR sale - $60k
Build cost - $400k
Build loan $340k.?
LMI topup - $6k
Total Loan - $759k
Total asset value - $850k / 89.2% LVR
Are there any other showstoppers with going with a 95% lend?