LMI difference on 90% and 88%

[MsAli]

Hi All,

Looking to refinance a property an ex-broker had financed with a lender who was utterly conservative and now we can't refinance. Not to forget several suggestions to fix it! Thank God we didn't.

We have gained around 19% in equity and would like to access this for further purchases. We paid $11k or so in LMI a year ago...which is money down the drain.

Keen to know how much difference in LMI are we looking at 88% vs. 90%?

Which lenders are good with desktop valuations? Considering refinancing a few others also.

Thanks,
MsAli

 

[Jamie M]

Hiya

Will the current lender not allow an increase up to 90%? Who is it with?

Cheers

Jamie

 

[MsAli]

Hiya

Will the current lender not allow an increase up to 90%? Who is it with?

Cheers

Jamie

Nah they won't. It's with CBA...

 

[Jamie M]

They should do depending on the purpose. If it were for non structural renos for instance then that should suffice.

If you're purchasing another property then they might want to see a contract of sale as evidence (or maybe a preapproval for the purchase). They will also want to see that the end debt services with them (so the top up and purchase loan) - is that where you're having issues?

Cheers

Jamie

 

[MsAli]

If you're purchasing another property then they might want to see a contract of sale as evidence (or maybe a preapproval for the purchase). They will also want to see that the end debt services with them (so the top up and purchase loan) - is that where you're having issues?

Not sure Jamie. Didn't get the details from our broker other than CBA not liking the idea and are uber conservative......

So they haven't asked for anything else.

Given, refinance is the only option we have right now, what would be the potential LMI difference between 88% and 90%

 

[Peter_Tersteeg]

CBA will usually happily do a top up to 90%, they're one of the easier ones.

Unlike many lenders, the CBA will also top up to 90% + LMI and still treat it as a 90% lend. You will pay a small amount more LMI, but this is the only penalty in borrowing an additional 1.5%. Most other lenders don't allow 90% + LMI without increasing the rate significantly.

It's okay for a broker to be conservative, but in my book this means they'll take the time to ensure you're making an informed decision, not giving you a vague statement that it can't be done. If you're properly informed, even if the broker doesn't agree with your decision, then they should be able to accept it and proceed comfortably.

Additionally if you are properly informed and it can't be done, then at least you understand why.

 

[MsAli]

Thanks Peter.

Back to my question, if it was 88% vs 90% what would be the potential LMI difference ?

 

[sanj]

Thanks Peter.

Back to my question, if it was 88% vs 90% what would be the potential LMI difference ?

What did your broker say when you asked hin/her?

 

[EN710]

Can probably ask? I topped up a 95% loan in CBA to another 95% with minimal fuss. Personal situation is different but 90% doesn't sound bad?

 

[Jamie M]

Thanks Peter.

Back to my question, if it was 88% vs 90% what would be the potential LMI difference ?

What's the property worth and which state is it in? Is it an IP or PPOR?

All in all - really would be best to try and stay with Cba and avoid being slugged another large LMI fee.

Cheers

Jamie

 

[Peter_Tersteeg]

Thanks Peter.

Back to my question, if it was 88% vs 90% what would be the potential LMI difference ?

The CBA doesn't publish an easy to read chart of their rates. I've attached the LMI quoting tool they provide, it should be able to give you the answers your looking for relevant to your loan amount. You're welcome to call on Monday if you need help with it.

Looking at the LMI chart for the Bank of Melbourne, the LMI rates at these LVRs for loans are:

$0 to $300k loan
88% LVR: 1.38%
89% LVR: 1.49%
90% LVR: 2.07%

$300k to $500k loan
88% LVR: 1.66%
89% LVR: 1.79%
90% LVR: 2.69%

$500k to $1M loan
88% LVR: 2.324%
89% LVR: 2.758%
90% LVR: 3.766%

BOM LMI is significantly more expensive than CBA, but I expect the comparison to be fairly reletive. Clearly the real difference is when you go from the 89% bracket to the 90% bracket.

What can also occur at some price points is the 88% loan might be $295k and the 90% loan would be $301k. In this scenario the LMI premium would go from 1.38% to 2.69% of the loan amount (ouch!) For the sake of borrowing $6k more the LMI premiums increase by $4025.

 

[MsAli]

What's the property worth and which state is it in? Is it an IP or PPOR?

Jamie, it's $520k. NSW. IP.

$500k to $1M loan
88% LVR: 2.324%
89% LVR: 2.758%
90% LVR: 3.766%

Thank you Peter. That really helps! 1.44% is a huge difference between 88% and 90%!!

Basically it seems we need to pay another $6,600 in LMI assuming another lender has a similar LMI policy at 88% LVR, as opposed to 17.6k at 90%

 

[D.T.]

Basically it seems we need to pay another $6,600 in LMI assuming another lender has a similar LMI policy at 88% LVR, as opposed to 17.6k at 90%

Or stay with the same lender and only pay the difference in LMI already paid?

 

[beachgurl]

My husband used to work for CBA and so over the years he had been "encouraged" to use their lending services. We've received so much conservative information from brokers and "lending experts" within the bank. My current broker said to ignore all that and has got us increases and loans that internal staff said weren't possible.

Does your broker use CBA a lot? Perhaps they don't know quite as much as others.

 

[Jamie M]

Or stay with the same lender and only pay the difference in LMI already paid?

This is what I'd be pushing for - I still can't see why a 90% increase with CBA can't be possible so spending thousands on another LMI premium seems crazy - but there could be something we're missing.

Cheers

Jamie

 

[geoffw]

Sometimes the rates are stepped. So the difference between 89.0% and 89.9% May be small- but the difference between 89.9% and 90% might be quite large.

We once took a cash advance from our credit card just to bring the percentage rate to just below the threshold, which saved us a reasonable amount.

 

[Marty McDonald]

Why are you wanting to release equity? New IP? Will the new IP loan service with CBA. If it does you don't have a problem. If it doesn't there is still a way around it sometimes.

I think you will find the difference in lmi between 88% and 90% will not be that much (bom is an extreme example) as it's only on the top up funds effectively. Also if you went for a 95% loan last time it will be bugger all.

 

[D.T.]

as it's only on the top up funds effectively.

Not if she goes elsewhere?

 

[D_One]

I've had top up to 90% with CBA on the same property twice. It is possible, perhaps, have a chat with one of the brokers on this forum.

 

[Rolf Latham]

the elephant in the room isnt CBA release policy, its very likely serviceability, as we know CBA falls into the lower 3rd of lenders for serviceability especially so with larger portfolios.

95 + cap lmi to max 97 % for PPOR purchase and

95 inc lmi for IP or IP based security

is quite achievable, though not necc recommended

ta
rolf