LMI and Tax deduction

Hiya

Am in the midst of organising finance for my 2nd IP. Would like to borrow 90%
on a property price of 250K

Questions:

1)Have approached Bank West and Commonwealth and ANZ. Their LMI came to $6000, $2400 and $3400 respectively. PLEASE EXPLAIN!

2)Am going to cough out 10% from my offset account which was attached to my PPOR; accountant said this 10% is not tax deductioble??HUH???
How to go about solving this? PPOR loan is with Westpac.

Thanks!
 
Hiya Virgo

Diff LMI providers will charge diff premiums.

Dont focus on the lmi cost though, look at the overall scenario and cost.

Whats wrong with using your current Pro pack at wbc ?

To solve your deductability problem, have the PPOR loan reduced by the 10 % paying on money from the offset, then insert another loan split of the 10 % and use that for the deposit.

Confusing % s here, pls come back with actual numbers and we can give you the detail to get ur broker or banker to do the work

ta
rolf
 
Lmi

Hiya

Thanks for the prompt replies; my mistake, just realise it is a redraw account which means when i take out 10% deposit,my PPOR loan will go up; however is it just a matter of printing out bank statement when that happens, keep it and show to accountant for interest deductibility purposes?

Sorry if i sound muddled (which i suspect i am!!)
 
Virgo,

Welcome to a rarely talked about issue.

Rolf is right, different LMI providers have different premiums.

However, you will also get different LMI premiums from the same insurer depending on the bank you choose.

If your broker is excellent ( a step above good ), they will know which lender has the best premiums , and sometimes, the savings in the premiums can offset any savings in fees or rate .

CBA have the cheapest premiums due to volume, however, it also depends if the lender passes on the RCTI benefit and give the borrower the GST instead of keeping it.

To re-inforce this point, Bankwest and CBA are essentially the same company , but look at the preium differences.

This is why investing time with a good broker would pay dividends. Normally I say a good lender as well, but each lender can only use whatever insurer they have and any discounts would come from rate / fee adjustments.


If you post the loan amount, I can give you a quote for St George just so you can compare further.
 
Lmi

Hi all

Very interesting.....i am leaning towards Bank West atm but will lean more

towards CBA if the LMI differential is big...my purchase price is only 250K and am borrowing 90%....

cheers
 
LMI is a percentage of the loan amount. For your scenario, depending on the lender it varies between about 1.2 and 1.6 of the loan amount plus stamp duty.
I think your larger quote of $6,000 might have been calculated for a larger loan amount, perhaps using more than just the purchase property?
LMI cost is only one factor to take into account. Its no use getting the cheapest LMI if the lender requires P&I repayments, or the interest rate is diferent, or the application fee is a whole lot more, or most importantly the product is inflexible and will cause you problems later on down the inveting track.
 
As an option to LMI - if you fit the policy - to do REF (reduced equity fee) with ING. With this you can go to 85% on a purchase for $699.

In saying this you might have to come up with some extra cash as they wont go over that 85% and lower fee. If it goes >85% then they can still do REF which would be lower than the LMI premium still, but then the charges would increase into the thousand(s) - I havent worked it out
 
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