Should I draw down to 90%

Hi folks,

Going about the process of drawing down my existing loan on a property worth $480k with a loan balance of $250k, and I've been quoted LMI of $800 to draw to 80% and $7300 for 90% (this is a lender that charges LMI even to 80%).

The one month penalty interest etc is probably too much to pay at this stage to refinance with another lender, but my question is... I'm looking at buying two IPs soon, and so should I just wear the LMI to draw down to 90% now so that I will have to borrow only 80% LVR on each of the next two IPs, or should I stick with 80% and instead pay some LMI on those two properties (hopefully only one) to go above 80%? Looking at the $400k mark for each of the next two.

Thank you,
Mal
 
90% now, and 90% for the next properties baby, go hard or go home!

Jokes aside, I would take the money at 90% if they were prepared to give it to me. Gives you all the flexibility for the next purchases...
 
Yes. Think of it this way, you are gong to pay LMI on your existing debt to avoid paying LMI on your next 2 debts.

While the LMI is a lot, it is probably cheaper than paying it on the next 2 applications.
 
Thanks guys. I crunched some numbers from an online mortgage insurance calculator in a spreadsheet and it does work out better (slightly) to draw to 90% and then keep the LVR as low as possible on the subsequent loans.

The advantage of drawing to 90% on the first loan is that since the draw down costs are so high each time, it's worth letting it take naturally longer for the LVR to drop below 80% again.
 
Hi folks,

Going about the process of drawing down my existing loan on a property worth $480k with a loan balance of $250k, and I've been quoted LMI of $800 to draw to 80% and $7300 for 90% (this is a lender that charges LMI even to 80%).

The one month penalty interest etc is probably too much to pay at this stage to refinance with another lender, but my question is... I'm looking at buying two IPs soon, and so should I just wear the LMI to draw down to 90% now so that I will have to borrow only 80% LVR on each of the next two IPs, or should I stick with 80% and instead pay some LMI on those two properties (hopefully only one) to go above 80%? Looking at the $400k mark for each of the next two.

Thank you,
Mal

A 1 month interest penalty on $250k @ 6% (assume you'd be paying less than this) interest is $1250. The penalty is only going to get heftier once you do the new borrowings. Unless your existing lender has a competitive product I'd be looking do a cost comparison elsewhere now whilst the hole is small.

The LMI premium quoted seems quite reasonable though. make sure they are quoting you on a lOC or IO loan not a P & I loan as the premium may vary (I assume extra funds will be 1 of the 1st 2 for tax purposes).

Regards
Steve
 
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