LVR - 80% Vs 90%

devank

devank

I'm aware of financial benefits of going 89% such as
- more money for deposits
- more deductions

However, I'm beginning to think 80% may not be bad either. Few reasons:
1. No LMI.
2. No strings attached. Can move anywhere anytime.
3. Relaxed valuation
4. Better rates
5. SANF
6. You can always increase to 90% LVR if you really have to

Am I just plain crazy to think like that? or is it sensible??
 
Well in a perfect world with unlimited capital then obviously 80% is best but most people don't have that option. Once your portfolio matures then 80% is the norm.
 
devank said:
I'm aware of financial benefits of going 89% such as
- more money for deposits (Great in the accumulation stage yes, but then, as stated in your reasons below, that's better to aim for in the long run. Let CG do this for you)
- more deductions (More deductions yes, but ultimately losing $1 to get 30c is false economy. Again let CG and rental increases do its thing as you are better off paying tax in the long run as you have made the property go positive)

However, I'm beginning to think 80% may not be bad either. Few reasons:
1. No LMI.
2. No strings attached. Can move anywhere anytime.
3. Relaxed valuation
4. Better rates
5. SANF
6. You can always increase to 90% LVR if you really have to
Click to expand...

The answer to your questions lies between grey and depends! :D


pinkboy
 
I use 80% LVR on renovation projects where part of my success relies on bank vals. Moved banks recently based on a good val.

For set and forgets, moving to 88% lend.
 
Probably depends on the situation. I'm going through a re-finance now. For one property, it had to be 90% to make it worthwhile. Also, I have had previously paid LMI for this property. For another property (I'm re-financing 2), it was no point paying LMI so I went with 80%.
 
devank said:
3. Relaxed valuation
4. Better rates
5. SANF
6. You can always increase to 90% LVR if you really have to
Click to expand...

Most know that Im a go hard early or dont go at all. LMI is progressivley harder to obtain. If you dont "need" it, great, there is no one size fits all approach that works.

My experience on the above

3. Vals will come down to lender mix more so than LVR. Most valuers wont value more harshly on a 88 + cap than an 80 %, especially on purchase. Refi............ id agree there is more latitude for a higher val.

4.Better rates, rate for risk sub 90 % isnt that much of an issue, above 90 % it can be, AS can access to Interest only ( eg Suncorp only PI for LVRs > 90)

5. Sanf. This is where I will make a different statement. A90 % lend with 10 % held as cash in offset is a much lower risk proposition than an 80 % with zero cash........... Most folks dont see LMI for what it actually is, its a transfer of risk.

6. Refi to 90. Anything that starts with "always " makes big assumptions, Cash out provisions, credit scoring, changing markets and creditrisk appetites, let alone changes in personal circumstances often mean the refi abve 80 isnt that simple

ta
rolf
 
devank said:
1. No LMI.
2. No strings attached. Can move anywhere anytime.
3. Relaxed valuation
4. Better rates
5. SANF
6. You can always increase to 90% LVR if you really have to

Am I just plain crazy to think like that? or is it sensible??
Click to expand...

1. Depending on many factors this is often just a cost of purchasing. Also knowing the different costs of LMI can save you thousands, $50 extra borrowings can costs thousands in LMI. You could also go further into it any saying that at times the costs of borrowing the funds (LMI) can free up cash (the 10% not used) to further invest which could make you multiple times the costs of the 1off LMI cost.
2. No strings attached is a good thing, but how many of us go to a lender with the intent to move within a short period and most of us purchase with the intent for growth early (when not planning for growth early, you're probably not wanting to be doing too much anyway)
3. val's dont think its too big a difference. But yes <80% can be easier.
4. Rates <90% usually are pretty close to the rates for <80%. The savings in rate is less then the flexibilty of cash and future investment potential by having the cash IMO
5. SANF for me is fine @ 90% even higher pending application. As mentioned already 80% with no LMI or 90% with the 10% in the offset works the same for SANF
6. Things change, valuatuions change. I'm always a believer of take the cash when you can. I use the ALWAYS (but I'm 100% sure Rolf will agree with this one)... Its ALWAYS easier to borrow money from the bank when you don't need it.


I think the main thing is that it all depends on the application and who it is. There is no one fits all. That's why it's most important that you have that quality conversation with your banker/broker about what your future plans are so they can assist you going forward. No point going 90% for someone buying 1 and has no intention of purchasing again, just like it would be very silly in my mind to commit a large chunk and overlook LMI for someone who wants to aggressively acquire property or improve a property (dev/reno).
 
There are very good points... confirming I was a a bit crazy. Pinkboy politely didn't disagree with that :)

What does lyfe mean DT?


Rolf Latham said:
5. Sanf. This is where I will make a different statement. A90 % lend with 10 % held as cash in offset is a much lower risk proposition than an 80 % with zero cash...
Click to expand...
This is a great point. This is what I'm trying to do no as I'm losing my job in few months.
Refinance all to 89%.
Leave the extra money in a separate IP purpose only offset.
Make all IP transactions come from that offset.
Hopefully, that should last long enough to fully look after itself.
 
For me you either go for 88%+ LMI or you don't bother with LMI. 85% is like being half pregnant unless you have some other reason like LMI waiver.
 
devank said:
I'm not Richard Feynman... :p
Click to expand...

It's ok, neither am I.

Rolf makes great points.

In my situation I'm not earning a shitload of income, so LMI is a powerful, POWERFUL tool, enabling me to acquire and hold more, sooner.

Consider this:

- Pay LMI
- Buy sooner
- See the LMI returned many times over in capital growth over the interval between when you DID buy (with LMI) and when you WOULD have been able to buy if you saved the extra 10%.
- Assuming a rising market, lets not mention how much MORE it would cost to buy the equivalent place by the time you've saved that extra 10% as well.

I'm all for using as much of OPM as possible.
 
Richard Feynman said:
It's ok, neither am I.

Rolf makes great points.

In my situation I'm not earning a shitload of income, so LMI is a powerful, POWERFUL tool, enabling me to acquire and hold more, sooner.

Consider this:

- Pay LMI
- Buy sooner
- See the LMI returned many times over in capital growth over the interval between when you DID buy (with LMI) and when you WOULD have been able to buy if you saved the extra 10%.
- Assuming a rising market, lets not mention how much MORE it would cost to buy the equivalent place by the time you've saved that extra 10% as well.

I'm all for using as much of OPM as possible.
Click to expand...

From previous chats I recall you and I having similar incomes and circumstances. I agree with the above wholeheartedly
 
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