LVR LMI Question - Equity top-up

[rizzle]

Let's say I buy property X at $500k at 85% LVR. In 12 months time it is now worth $550k.

Can I extract the extra equity without incurring extra LMI (assuming I keep the LVR at or below the original 85%)?

If I decide to take the LVR up to 90%, do I cop a full LMI charge again, or the difference between the original LMI fee that I paid and what is owed on a 90% lend?

 

[Jamie M]

Hey Rizzle

You always pay something.

When topping up with the same lender - you just pay an adjustment fee (so not a whole new premium).

For instance - if you paid $5k before and the new premium is $7k, then they credit back that $5k you already paid so you're left paying only $2k.

If your property has gone up in value - and the new LMI is less than what you paid previously. They'll still charge an admin fee....which is usually under $1k

Cheers

Jamie

 

[jpcashflow]

Hi Rizzy,

Jamie took the words out of my mouth -

 

[Terry_w]

You would pay LMI on the increased portion but get a credit for any LMI paid.

If you started off with a 85% No LMI loan I think you would have to pay LMI if you increased the loan above 80%. But I have never done this before so may be wrong.

Consider also the tax consequences.

 

[rizzle]

Thanks for the replies. In this case the lender is BankWest.

 

[Qlds007]

Other considerations are:

1) LMI premium rates have increased.
2) Your lender may have changed LMI companies they use since the initial loan.
3) You might now be in a different loan table rate so the premium factor rate for an 85% loan on 300K would be different to one at 500K.

Good luck with Bank West and equity releases.

Think have a filling at the dentist would be less painfull.

Cheers

 

[Peter_Tersteeg]

Let's say I buy property X at $500k at 85% LVR. In 12 months time it is now worth $550k.

Can I extract the extra equity without incurring extra LMI (assuming I keep the LVR at or below the original 85%)?

If I decide to take the LVR up to 90%, do I cop a full LMI charge again, or the difference between the original LMI fee that I paid and what is owed on a 90% lend?

Firstly you need to be aware that if you switch to a different lender, you'll pay LMI on the full loan. The LMI you paid for with the first lender is not recognised by the second.

You're going to pay some LMI in each of your scenarios, how much depends on which lender it's with.

Some lenders will calculate the full LMI on the new loan and credit you back the LMI you've previously paid.

Some lenders will simply calculate the LMI on the amount you're increasing. This usually works out very well in your favour, especially if you've seen significant growth in the property value.

You'll generally find that there is a minimum amount of LMI you'll be charged. If the calculations suggest the premium will only be $300 I'm fairly certain it's going to be more.

LMI is one of those black arts of lending. Even the lenders themselves have trouble quoting until they get the figures back from the mortgage insurer.

 

[rizzle]

Thanks everyone. Now I just need the market for my property tpye to actually move