Mortgage Insurance

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From: James Hardy


When planning to buy IPs I have read that it is good to max amount borrowed.

Should I borrow just 80% and avoid Mort. insurance or is it OK to borrow up to 90% and pay the insurance which I assume is a a tax deduction?

Any ideas?
 
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Reply: 1
From: Duncan M




Hi James,

My advice (from Rolf originally) is use LMI as much as possible in the early
days of acquiring a portfolio, because when you get to a certain limit
(generally around $500k) they wont touch you with a bargepole. Using LMI
early will enable you to develop a larger portfolio faster.

LMI can be depreciated over 5 years or the term of the loan whichever is
shorter.

Duncan.
 
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Reply: 1.1
From: Astro Boy


Hey there,

can someone give a brief summary of how LMI is generally calculated and what the costs are expected to be?

ta

AB


 
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Reply: 1.1.1
From: Rolf Latham


Hi AB

LMI is calculated as a Percentage of the loan amount.

There are a number of things that affect the premium and aome of them are:

1. The amount borrowed. Up to 300 k there's one scale, btwn 300 and 500 is another scale and > 500 theres another scale.

2. Whether the loan is P&I or Interest Only, commonly there is a 25 % mark up in the premium where there is an interest only loan.

3. New property vs established property. .25 to .35 % extra for new is becoming common.

4. 3 % or 5 % genuine savings.

5. And of course, one of the biggest issues is it an 85 % loan or is it a 95 % loan.

6. Which state you are in determines how much stamp duty you pay on the premium, at btwn 5 and 11.5 %.

7. Whihc mortgage insurer is used.


To show the variance, lets look at a 250 k P&I loan at 85 % in QLD with 5 % genuine savings for an established property. Approx premium would be around 2150.

Now lets look at an Interest only loan at 400 k at 95 % for a new property with 3 % genuine savings In NSW. This would be a cool 17 000.

Bit of a variance :eek:)

Ta

Rolf
 
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Reply: 2
From: Rolf Latham


Hi James

Actually, depending on your circumstances a 97 % + loan may be even better.

Ta

Rolf
 
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Reply: 1.1.1.1
From: Astro Boy



Hey rolf - thanks for that.

Looks like I'm at the steep end of the curve:

assuming:
- Interest only
- approx $450k loan
- NSW
- established property
- 5% genuine savings
- which ever insurer is cheapest! (do I have a say - or is this up to the lender)

I would be up for... $10k+? and if the loan value was to change - say $400k or $500k?

thanks again rolf

ab


On 4/23/02 11:47:00 PM, Rolf Latham wrote:
>Hi AB
>
>LMI is calculated as a
>Percentage of the loan amount.
>
>There are a number of things
>that affect the premium and
>aome of them are:
>
>1. The amount borrowed. Up to
>300 k there's one scale, btwn
>300 and 500 is another scale
>and > 500 theres another
>scale.
>
>2. Whether the loan is P&I or
>Interest Only, commonly there
>is a 25 % mark up in the
>premium where there is an
>interest only loan.
>
>3. New property vs established
>property. .25 to .35 % extra
>for new is becoming common.
>
>4. 3 % or 5 % genuine savings.
>
>5. And of course, one of the
>biggest issues is it an 85 %
>loan or is it a 95 % loan.
>
>6. Which state you are in
>determines how much stamp duty
>you pay on the premium, at
>btwn 5 and 11.5 %.
>
>7. Whihc mortgage insurer is
>used.
>
>
>To show the variance, lets
>look at a 250 k P&I loan at 85
>% in QLD with 5 % genuine
>savings for an established
>property. Approx premium would
>be around 2150.
>
>Now lets look at an Interest
>only loan at 400 k at 95 % for
>a new property with 3 %
>genuine savings In NSW. This
>would be a cool 17 000.
>
>Bit of a variance :eek:)
>
>Ta
>
>Rolf



 
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Reply: 1.1.1.1.1
From: Rolf Latham


Hi Again

Ok - If the application is really strong and by that I mean say 5 years employment history, good equity in ones own home etc etc etc you might be able to get to a 95 % I/o loan at 450 for IP

Typically 399 is it, 400 + is 90 % and over 450 youre going down to 85 % ish LVrs.

Ok so assuming you could get a 450 k 95 % i/o lend in NSW the premium could be around 11 000.

ANZ would for example allow you to borrow that amount on top of the 95 % loan, so you would have a 97 % loan.

Not cheap, but much less hassle than trying to save 20 % + costs :eek:)

Ta

Rolf
 
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Reply: 1.1.1.1.1.1
From: Astro Boy


Right, so it seems if may make sense to go for P+I (for a while anyway), that way the loan is easier to secure, cheaper and (assuming its still around) I am up for FHOG. I could live there and renovate for a short while before flipping over to IO.

Either way, I think I'll be giving you a buzz in the coming weeks.

Cheers
ab



 
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Reply: 2.1
From: James Hardy


Thanks everyone!

Rolf,

What do you mean by good equity?

Our home is worth 400K and we owe 246K.

No other loans or credit cards with combined income of 80-90k no kids.

Regards James.
 
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Reply: 3
From: KLAUS STURM


Hello all,
Is it possible to get a refund of the loan mortgage insurance paid, when you drop down below a certain percentage repaid?
Thanks,
Klaus
 
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Reply: 3.1
From: Tibor Bode


Hi Klaus,

I've asked the same question. Please look at another thread with a similar question, posted about 2 weeks ago. Some people have mentioned that they got it back, I am in the process (my broker is actually doing it) but it would seem to me quite reasonable. Rolf also had an interesting comment on it.

Tibor
 
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Reply: 2.1.1
From: Rolf Latham


Hi James


Depending on all the peripheral stuff youd qualify for a 97 % equivalent loan at around 300 k for IP.

I'd recommend seeking out the services of a
good independent broker to advise you on this rather than any one lender.

Ta

Rolf
 
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