# Lenders mortgage insurance

#### IanF

From: Ian Findlay

Hi all,

Can anyone advise how lenders mortgage insurance is calculated.

For example if property value is \$150,000
80% LVR (\$120k) = no insurance.

However if 90% LVR (\$135k) with an insurance premium of 1%. Does this mean 1% on the total \$150k (\$1500) or 1% only on the 15k difference (\$135-120=15) i.e. \$15?

In the UK it is only on the difference as the banks are happy with the original 80% but get the lender to pay for insurance for the difference so they get their money regardless in case of default.

However I've been told that all banks in Australia calculate it on the total value i.e. \$1500 in the example above - is this true?

Ian

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From: The Gow's

hi Ian
here are the figures but not sure about if it is on the full loan amount, but i think it is.
LVR <80%:0.0%
LVR >80<85%:1.5%
LVR >85<90%:2.0%
LVR >90%:3.0%
Regards,
John

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From: Rolf Latham

Hi Ian

Usually the premium is calculated on the entire loan value.

Ta

Rolf

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From: Rolf Latham

Yow, those are painful rates above the 90 % mark.

Ta

Rolf

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From: Les .

G'day Ian,

Just a couple of points that might help -

1. LOC loans have a higher %age rate than IO or P&I - approx. 0.5% ???

2. I believe the amount steps at each 1%

e.g. 80% = 0.5%, 81% = 0.6%, 82% = 0.7% etc.
(and those figures are an example only, but might be close)

3. A chart I have shows 90% at approx. 1.5%

And it is (as Rolf said) on the full amount of the loan.

Regards,

Les

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From: Ian Findlay

Hi,

Thanks all.

It seems the lender wasn't pulling my leg then. Pain - we were planning to increase our LVR from 74% to to 86% instead of 80% and use the extra equity to buy another property.

Ah well, we'll just have to save up the deposit.

Ian

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From: Dave

Am I the only one not overly concerned with Mortgage Protection
Insurance? I don't mind wearing it if it's for an IP...if it means I
have more buying power.

Dave

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From: Dave

Hey Mike,

Flippin heck!!

*grins*

We've got it good these days. I know what you mean...money hasn't been
as cheap as it is now for YEARS. IF I have to pay a few thousand dollars
to borrow the maximum amount of this readily available cheap money, I'll
do it.

I haven't got my head around flipping yet....so I won't get into a long

I'll just stick to buying and holding for the time being...get the
maximum return on that "cost of business" I fork out.

Cheers,

Dave

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From: Rolf Latham

Hi Ian

The cost of your LMI should be recouped very quickly if you are making a wise investment in property. Indeed waiting and saving the deposit is usually a losing proposition where the property price increases faster than you can save the increased deposit.

If you do not want to pay the LMI, borrow it, it seems you have the equity.

If you dont have the equity refinance to a lender that will add the mortgage insurance to the loan.

LMI is a pain yes, but like a mortgage is just another financial instrument that if used properly can help a lot.

Ta

Rolf

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From: Ian Findlay

Hi Rolf,

The option I had was to borrow the LMI on the property at low interest
rates - which is fine - I've done this with one property at 95% LVR.

The bit I didn't like was when I wanted to borrow \$15k using another
properties equity and the lender wanted to charge me almost \$2000. As the
LVR had gone above 80% in this case they wanted to charge the LMI on the
whole bleedin loan thats why it was so high (\$2000 to release \$15k -
13%!!!). Anyway it wont take too long to save up another \$15 to buy another
property.

All our other properties are at 80% LVR. Would you advise increasing these
to 95%, paying the LMI, but getting cash to spend on more IPs?

Ian

> From: "Rolf Latham" <[email protected]>
>
> Hi Ian
>
> The cost of your LMI should be recouped very quickly if you are making a
wise investment in property. Indeed waiting and saving the deposit is
usually a losing proposition where the property price increases faster than
you can save the increased deposit.
>
> If you do not want to pay the LMI, borrow it, it seems you have the
equity.
>
> If you dont have the equity refinance to a lender that will add the
mortgage insurance to the loan.
>
> LMI is a pain yes, but like a mortgage is just another financial
instrument that if used properly can help a lot.
>
> Ta
>
> Rolf
>
>
>
> To reply: mailto[email protected]
> To start a new topic: mailto[email protected]
> To login: http://bne003w.webcentral.com.au:80/~wb013
>

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From: Dave

Hi Ian,

Sorry to be eaves-dropping on your conversation with Rolf. *grins*

In answer to your question, I would...use more money, that's not my own,
to spend on IP's and just wear the LMI.

....what I would do anyway.

Dave

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From: Rolf Latham

Hi Ian

I see what you mean !

95 % gives you more deposit moeny. If you can afford the increased LVRs and the new IP loans, and the IPS are good investments and you manage all your risk properly, then yes 95 % refinances are good. Not many lenders will do them though.

Ta

Rolf

Rolf

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From: Samantha Lind

Howdy,
Have to agree with Dave, you don't need to use just the banks money for your IP. get the money any way you can, then reval your property and refinance the loan in a more traditional manner later on. Do what it takes to secure the property.
Sam

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From: Samuel Riley

and some lenders even let you put the cost of the LMI into the total loan amount.

hey Rolf?

eg a 95%lvr becomes 97% with no \$\$\$ coming from your pocket

worth knowing i think,

Sam

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