I'm MG who works for IBM-GSA as a SYS Op on CX for CPD which connects to LAN via DCP to SITA using a HLC and CSC complains about PIDs to me and the TL tells me the SDM is getting flack from the ODM cause where missing SLAs!
>Anyway what do folks think
>about the relative merits or
>disadvantages of using 95% LVR
>and paying mortgage insurance
>rather than the normal 80%.
Take a $200k property - for 80% and no LMI, you have to put in $40k of your own (cash or equity in other property). And let's throw in another 5% to (largely) cover costs (Stamp Duty, sol'r fees, etc.)
So at 80%, you are inputting $50k of your own.
If you are able to get 95% on the same property your costs increase by the amount of LMI (say, 2% for 95% LVR) - or $4k. BUT, you pay only $10k deposit. So total input from you is $24k.
Summary: HALF the cost to you to "get in" to the deal.
Ongoing: Now you have 15% more mortgage Interest to pay (at 7% Interest, this is an extra $2100 per year). So, all other things being equal, you have saved $26k NOW, which you will pay (in tomorrow's dollars) over the next 12 to 13 years.
1. You have successfully deferred HALF the cost of purchasing an IP. This allows you to "fill up" on IP's sooner, depending on your wage, your spending, the Interest rate, the economy, supply/demand ratios, etc.
2. You may be able to purchase sooner (thus, at a lower price??) by not having to save such a large deposit. (Affects first-timers mostly)
Disadvantages: (you're kidding!! ;^)
No, I'M kidding - possibly the major disadvantage would be for those that "fill up" too quickly, without a thought for the future. If Interest Rates were to go into "lift-off" ('89/'90) and the investor had not fixed, and they were newly into A NUMBER of IP's, and they were all heavily (95%) negatively geared, then this could become a rather un-lovely scenario.
Another disadvantage I can think of is the fact that LMI companies are having "the final say" re your loan. Banks can give you all the approval in the world, but if the deal is greater than 80%, then their decision can be vetoed by the Mortgage Insurance company. It adds another level of complexity to the issue of raising finance.
I've heard there are only FOUR of them in Oz, and some appear to be less sympathetic than others .....
I'm sure there will be other pro's/con's too - let's see what other non-newbies can tell us. AOT*