Mortgage Insurance

[MYOBB]

I have my PPOR & 1 IP and am keen to get a 2nd IP, however my LVR is approaching 90%. Is mortgage insurance calulated on a sliding scale & does anyone have this info so I can determine the damage. Also should I wait till my LVR is below 80% (avoiding Mortgage Insurance) or is this just a personal preference based on the expected capital growth vs waiting.

 

[Rolf Latham]

Hiya Quicken

Hmmmmmmm, yes LMI is calculated on a sliding scale but has many variables.

The actual amount of the loan
Is it below 300 k btwn 300 and 500 or over 500
Is it P&I or Interest Only
Is it for new or established property.
etc

Generally at 90 % expect to pay 1.5 ish % of the loan value.

At 95 % around 2.1 % is not unusual.

Ta

Rolf

 

[geoffw]

Just to add to Rolf's explanation- it wasn't quite sliding the last time I had it applied (early this year). It was a stepped scale- and by borrowing 89.9% instead of 90% I saved a fair amount- from memory, a few hundred dollars. When that comes out ofmy pocket, and not from a loan, that amount hurts more.

 

[MYOBB]

Rolph,

The new loan would be below $200k, would be IO & the total LVR between 87-89%. I thought the maximum LVR was 90%, yet you mention 95%. I understand that the LVR on this 3rd loan would be greater than 90% but the total LVR of all my properties is in the above range. Am I cross collatorising by funding my loans in this way, as I see this term mentioned but don't understand what is meant by it.

 

[Rolf Latham]

Hi Quicken

Certainly looks to me like youre going down the elastic path, cross collateralisation.

Who is the lender ?

ta

Rolf

 

[MYOBB]

Currently both existing properties are with Bankwest.

 

[Rolf Latham]

Hiya

May we please use your situation as a teaching template ?

I dont need any information about who you are or income etc , but would need individual loan and property values ?

Ta

rolf

 

[MYOBB]

Rolph,

ppor LOC $121,000, Value $185,000
IP IO $147,000, Value $147,000

Proposed 2nd IP IO $190000, Value $180,000.

or am I heading into troubled waters..........

 

[Rolf Latham]

Hiya

Ok here is some issues you may want to think about.

Bankwest is a great lender with some really nice products. They use one single mortgage insurer. That insurer will go to a maximimum of 500 000 in Brisbane at 90 %.

So you are ok to this deal but what ya gonna do for the next one ?

I would have done it a little differenlty than your current broker ( not necc better, just different)

I would have taken your PPOR at 90 % = 166 500 loan
166 500 - 121 000 = 45 500 for investment.

Then IP1 I would have done at 95 % (even with bankwest say), this would suck up 15 k in deposits and costs.

IP2 would be at 90 % so need 28 k in dep and costs.

Leaves very little for the next deal, but because every property is now single, you can take it anywhere for an equity increase when it becomes available.

On your numbers the overall LVR is close to 90 % and JUST slips through, and the lmi premium to be paid is much larger because the % premium is charged on the total loan amount, not the intermediates because the props are cross collateralised.

Benefit of xcoll is a higher LVR than without at high lends and pooling of equity and reduction of loan running costs.

Soooooo, no hot water - yet
Ta

Rolf



ta

Rolf

 

[MYOBB]

Rolph,

Excellent information, this was the missing piece of the puzzle I needed to see my investment future. I think I will amend my evil ways & implement a non-collatoralised structure for the future.

 

[trijap]

If you are increasing an existing loan rather than a new loan the MI may only be payable on the increase amont.