Mortgage Insurance advisable?

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From: Iris H


Hi all,
I am about to refinance my 2 IP and was told that the banks like one to have mortgage insurance even if the LVR is under 80 % . This would enable me to get more finance approved in the future to buy further IP.

As this is not a small cost I am asking myself whether it is advisable to do so.

Is it possible to get mortgage insurance at a later stage if I'm having trouble to get further financing for the next IP's?

Has anyone had the experience that banks didn't want to finance because the applicant didn't have mortgage insurance for their other IP's?

Any advice greatly appreciated, Iris
 
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Reply: 1
From: Rolf Latham


Hi Iris

Mortgage Insurance is a funy thing. You either love it and try and do almost very deal with it to conserve your precious equity OR

you hate it and see it as a useless financial impost.

Much depends on your overall financial situation. If you are looking to gorw your portfolio quickly AND you dont have lots of equity or savings abaility, then commonly Mortgage Insurance can be a great tool to help you borrow more.

if you are going to do the Mortgage Insurance thing understand that it becomes progressiveky MORE difficult to get it the more debt you have. Soo if you think you are an aggressive investor go early and go often.

If you are not ging to buy anohter place in the near future then its not so obvious.

Suggest you speak with a good independent Mortgage Broker to assess your options.

Ta

Rolf
 
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Reply: 2
From: Richard Hunt


Iris,

The LVR at which a lender will ask for LMI will vary between lenders and depend on the characteristics of the property including location (metro/regional/country) and type (house/studio/serviced apartment).

Shop around and you may be able to obtain the funds you want and avoid LMI.

If you discover that you need to incur LMI to secure the funds required then one important factor in your decision to proceed or not will be how soon you expect to proceed with your next IP purchase. If its iminent, then you may have no choice but to pay the LMI, otherwise you can defer establishing a facility for further funds and if the value of your current IP increases in the meantime, possibly reduce or even eliminate any exposure to LMI when you eventually set-up the facility with the lender.

Your decision may also depend on whether the lender will charge you any additional fees if you delay establishing the facility (eg. app fees, top-up fees). Check with the lender.

Hope this helps.

Cheers
Richard
 
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Reply: 2.1
From: PT Bear


Funny thing happened to me on the last refinance. When I said I only wanted to only draw to 80% on my equity (no mortgage insurance), the lender gave me a much more favourable valuation and is more forgiving on my serviceability.

PT_Bear

"Have fun, be successful, make lots of money, be someone who makes a difference, and above all else, don't forget the view."
 
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Reply: 2.1.1
From: Rolf Latham


Hi PT

Reasons

At 80 % many lenders will do kerbsides rather than full vals. This can help if you have a dog in a good area/market.

Mortgage Insurance providers commonly have tougher serviceability criteria than the funder - some MUCH tougher.

The second reason is why if one is going to use LMI that one does it early on.


Ta

Rolf
 
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