LMI - Friend or Foe?

[parlayman]

Great posts and sharing of knowledge here.

would it be better paying the LMI and "reserving" the equity of our PPOR so we can realise it as a true profit when we sell it in the future?

Going back to one of my questions (as quoted above), is this in the correct line of thinking or totally wrong?

 

[Rolf Latham]

Great posts and sharing of knowledge here.



Going back to one of my questions (as quoted above), is this in the correct line of thinking or totally wrong?

Is it your PLAN to sell ??


ta
rolf

 

[parlayman]

Highly likely to sell in the future as we want to upgrade, which means we'll probably need bigger deposit. This bigger deposit we're thinking will be the equity we can get from our current PPOR.

 

[Peter_Tersteeg]

I guess the flaw in my logic is that it's a convoluted way of saying an 80% IO Loan is cheaper than a 90% IO Loan

That's a fair point. Your spreadsheet also compares interest only loans with P&I personal loans over different periods of amatorisation. You're effectively changing multiple parameters in each scenario so they're not a true apples to apples comparison.

To properly compare scenarios, you either need to make all loans amatorise over a fixed period (as I've used in my scenario), or have all the loans interest only for the same period (in which case any amount at 15% is bound to be more expensive over time).

The reason in your argument that it's cheaper to go with a personal loan at a higher interest rate is compared to the loan size, you've got massive cashflow. In this case, the effect of interest rates on the outcome is less than the effect of fees (such as LMI). If you applied the same cashflow/fee/interest rate figures to a $1M loan, you've got a very different result because you'd loose most of the ability to pay down the more expensive personal loan quickly. For a larger loan, or with reduced cashflow, the effect of time has more of an impact on cost, thus the effect of the interest rates has more bearing.

 

[evan1875]

oh gosh

when I did my most recent Self Development Psych Course they said that many Humans' biggest failing was one thing..........just ONE thing, and this one NEED has started wars, broken up families, and is the NUMBER one reason why most of us cant grow............................


Anyone wanna have a guess

ta
rolf

how do you overcome that?

great thread!!

 

[Ergophobia]

how do you overcome that?

great thread!!

he never did tell us what that is...

I'm guessing its the need to be correct... otherwise known as ego

 

[DaveM]

they said that many Humans' biggest failing was one thing..........just ONE thing, and this one NEED has started wars, broken up families, and is the NUMBER one reason why most of us cant grow............................

Anyone wanna have a guess

Women????

 

[Rolf Latham]

how do you overcome that?

great thread!!

The need to be

RIGHT


I fight it all the time

ta
rolf

 

[wobbycarly]

The need to be

RIGHT


I fight it all the time

ta
rolf

Hence my difficulty in being successful as a share trader...

 

[Ergophobia]

The need to be

RIGHT


I fight it all the time

ta
rolf

I think Carl was right...


The need to be right is a powerful one.

I see salesmen use this all the time in real-estate... they often push for potential buyers to make the decision subconsciously well before it has come to the formal offer stage with phrases like "Should I forward a contract so you can get started?" once you have said "yes" once, the rest of the sale is much easier.

... then again, I might be wrong