No LMI?

[dwv]

We're having problem with the bank regarding a display home (as an IP). They would accept our application only if we pay 20% of the loan as the display home can't be covered by LMI. Our broker worked around the problem and came up with a solution which the bank accepted. This was explained to us yesterday and we agreed. However, I was just wondering about some issues this morning (gonna confirm broker later this morning):

Scenario 1:
a. PPOR loan
b. 485K loan (9K LMI included), 45K deposit

Scenario 2:
a. PPOR loan + 85K
b. 400K loan, 45K deposit

Questions:
1. In scenario 2, if we still pay a 45K deposit, shouldn't our 85K loan decrease by 9K (to 76K) as there's no more LMI?
2. What are the implications on tax? One thing I can think of at the moment is that we cannot claim LMI as an expense.
3. Is scenario 2 same as using equity on PPOR loan?

Thanks in advance.

 

[letiha]

You can claim the LMI as an expense, it is deductible over 5 years, or the length on the loan.

For example we settled on land in June, 4 weeks later because of the stupid banks backflip on construction we had to refinance. We get to deduct the LMI from the first loan straight away, the LMI for the re finance will be spread over 5 years.