Lmi

[C Stewart]

Hi everyone,

Got a quick question about LMI. At what levels are the significant jumps in LMI costs.

From mucking around on Genworth's calculator I can see there's a pretty big jump going from and LVR of 89% to an LVR of 90%, was wondering if there are any other LVR points (e.g. 85%) where LMI jumps, or is it just 90% and the rest is a linear scale?

 

[Brady]

Depends on loan amount as well.

Large jump for borrowing $301K @ 90% compared to $300k @ 90%

 

[Redom]

Hi everyone,

Got a quick question about LMI. At what levels are the significant jumps in LMI costs.

From mucking around on Genworth's calculator I can see there's a pretty big jump going from and LVR of 89% to an LVR of 90%, was wondering if there are any other LVR points (e.g. 85%) where LMI jumps, or is it just 90% and the rest is a linear scale?

Hey Stewart,

Generally it works on a sliding scale based on LVR and loan amount.

Generally a kick up from 88%, 89% and 90%.

In terms of loan amount, for smaller loans, the 'jump' is lower. E.g. If your borrowing 95% on a 200k loan, itll be something like 92.5%+2.5% LMI. Whereas if you're doing 95% on a 600k loan, it'd be more like 90.5% + 4.5% LMI.

I'm pretty sure i've seen a neat one pager posted from Peter before. He may have it on hand again.

Cheers,
Redom

 

[Rolf Latham]

Hi CS

The underlying issue behind the non linear rise in LMI cost is that the risk to the LMI provider increases Non linearly as well.

The kicker that many dont understand is that the credit score for the loan needs to be progresively better too.

A loan that may sail through at 88 might have no chance at 93 etc

ta
rolf

 

[Peter_Tersteeg]

In terms of loan amount, for smaller loans, the 'jump' is lower. E.g. If your borrowing 95% on a 200k loan, itll be something like 92.5%+2.5% LMI. Whereas if you're doing 95% on a 600k loan, it'd be more like 90.5% + 4.5% LMI.

I'm pretty sure i've seen a neat one pager posted from Peter before. He may have it on hand again.

I think you're referring to the attached document. It's the Genworth LMI table for Bank of Melbourne (St George). It's quite likely that the premiums are different for the CBA (who doesn't publish their table), but it does illustrate where the sweet spots are likely to be.

Anyone fancy a loan over $1M at 95%? 5.208% LMI and then there's stamp duty on top of that. As Rolf indicated though, the real trick would be getting it approved in the first place.

 

[Redom]

I think you're referring to the attached document. It's the Genworth LMI table for Bank of Melbourne (St George). It's quite likely that the premiums are different for the CBA (who doesn't publish their table), but it does illustrate where the sweet spots are likely to be.

Anyone fancy a loan over $1M at 95%? 5.208% LMI and then there's stamp duty on top of that. As Rolf indicated though, the real trick would be getting it approved in the first place.

Thats the one. Thanks Peter.

 

[C Stewart]

You're a legend Peter, thanks mate. I'll whack that data in a chart and I'm good to go!

 

[Peter_Tersteeg]

You're a legend Peter, thanks mate. I'll whack that data in a chart and I'm good to go!

Return the favor and publish the chart here! Lots of people would be interested.

 

[C Stewart]

Just had a quick play with the numbers to get a first cut. Looks like things start getting serious at LVR's of 88% and up, at least for Bank of Melbourne.

 

[Peter_Tersteeg]

Awesome work C Stewart.

Definitely appears that 88% is the sweet spot for BOM.

I played with figures on some other lender calculators. In many cases 89% LVR is still reasonable, but 89.1% is where it jumps.

Many lenders do provide a spreadsheet style calculator but it's protected. You've got me wondering if there's a way to use those calculators as a programming 'black box' to generate similar graphs across a range of lenders. You're bringing out my 'inner nerd'.

 

[Redom]

Just had a quick play with the numbers to get a first cut. Looks like things start getting serious at LVR's of 88% and up, at least for Bank of Melbourne.

Great work. Kudos to you!

 

[Redom]

You're bringing out my 'inner nerd'.

Haha is it that 'inner' Peter? It doesn't take much for me to start spread sheeting/excelling anything!

 

[Jaggannath]

You're a legend Peter, thanks mate. I'll whack that data in a chart and I'm good to go!

Are you fully lucky in disguise? Oh wait, your chart makes sense.

 

[Casomme]

Here is a spreadsheet containing the LMI percentages for each price and LVR bracket to give you an idea.

https://drive.google.com/file/d/0B4PNf_BaGDzZbnRSUENqVHh3TVU/view?usp=sharing

 

[tobe]

Awesome work C Stewart.

Definitely appears that 88% is the sweet spot for BOM.

I played with figures on some other lender calculators. In many cases 89% LVR is still reasonable, but 89.1% is where it jumps.

Many lenders do provide a spreadsheet style calculator but it's protected. You've got me wondering if there's a way to use those calculators as a programming 'black box' to generate similar graphs across a range of lenders. You're bringing out my 'inner nerd'.

presenting the verticle axis as thousands of dollars rather than percentages would look better I reckon. Make a better impression.

 

[C Stewart]

That'll take slightly longer, give me a few mins, I'll post it up

 

[C Stewart]

Ok, sorry guys, this is a bit messy, data overload! I don't think the charts are a great way to display this info, too busy. For those interested I've attached 2 charts, one with a sample from 300k to 1.5 mil and one just looking at LMI costs up to $20k which seems more realistic.

However, have a look at the second tab in the excel doc, I think thats more useful. You can just grab one line and chart LMI costs in $$$ for a particular loan value as you need.

 

[C Stewart]

Though messy, the charts do show LMI jumps when the loan amount crosses $500k and again at $1 mil, in addition to the jump at 88% mentioned earlier.

 

[z611143]

Was speaking to a finance broker lately in perth and he was pretty much saying you should really aim to have at least the 10% and borrow max 90%. Thats just for me as a potential FHB and not everyone, im sure he says different things to others in different situations.

Also probably because most banks wont lend more than 90% in my situation either.

 

[Redom]

Was speaking to a finance broker lately in perth and he was pretty much saying you should really aim to have at least the 10% and borrow max 90%. Thats just for me as a potential FHB and not everyone, im sure he says different things to others in different situations.

Also probably because most banks wont lend more than 90% in my situation either.

That comment is a general rule of thumb for investors - particularly given what Stewart showed earlier with LMI 'jumps'.

There's exceptions to this advice of course - depending on the investors strategy.

For a FHOB purchasing a PPOR, just looking to find a place to live and take advantage of incentives - the 'at least' 10% deposit sometimes is less relevant. Building up 40-50k in savings is quite a fair bit. Often getting in (particularly in a rising market) at 95%+ for this segment is a good option to achieving their goals.

Cheers,
Redom