Suncorp won't go beyond 90% LVR...

[Lukey13]

Hello to all the mortgage brokers and knowledgeable persons!

I would appreciate some information and advice on my situation which is as follows:

PPOR bank valued at $385K - current loans $247K + $79K (84% LVR)
IP1 bank valued at $317.5K - current loans $254K (80% LVR)

I spoke to a MB from Suncorp today about financing IP2. She advised that serviceability would be fine (would offer another $750K of loans to me!) but equity was limited. That is, Suncorp's mortgage insurers would only allow a maximum LVR of 90% for any purchase involving use of equity from another property.

Therefore, my deposit on IP2 would be limited to:
$18K equity from PPOR (incurring LMI of $307)
$34K equity from IP1 (incurring LMI of $4.8K - due to fact I would then be paying LMI against the full amount of $34K plus the existing $254K which I thus far haven't paid LMI on)

With a total equity deposit of $52K I would be able to purchase IP2 of value up to just under $500K, taking into account purchase costs (likely including substantial LMI on a 90% lend against IP2).

Now for my questions...

Is there an easier way to do this? Preferably without having to pay $4.9K LMI just to access $34K worth of equity.

By using a separate lender (and thus a different LMI provider) would I be better off in any way? For instance, would I be able to go beyond 90% LVR on any of the loans?

Any advice would be much appreciated.

 

[craigb]

i've said it before, just add a room to your existing ip!

 

[Aimjoy]

Now for my questions...

Is there an easier way to do this? Preferably without having to pay $4.9K LMI just to access $34K worth of equity.

By using a separate lender (and thus a different LMI provider) would I be better off in any way? For instance, would I be able to go beyond 90% LVR on any of the loans?

My understanding is that many times a lender will say Yes to a deal that their MI will say No to. There are only 2 MI's in Aust (I think?) GE & PMI. Maybe Prime is still around (they used to do Rams lends). So:
You could try a lender that does not use the MI that Suncorp uses (ask who they use)
Or use a lender that self-insures like Westpac or St G.

MB's will suggest other ways I'm sure.

 

[tobe]

You could switch accross all your properties to another lender who would do 95% re finance. There are only a couple left who will do this anymore. You will pay LMI again. You can then do a 95% loan on the next IP. Going further into the figures, you may be better off just taking the property with the most equity to one lender to 95% and then a 3rd for the new purchase at 95%
Time to call a good broker, and assess whether you are willing to pay the LMI costs of your next purchase....

 

[Qlds007]

Suncorp unfortunately aren't now and never were the most aggresive lender out there so the decision to limit the lvr to 90% isnt new to hear.

As Tobe has mentioned why not refinance the property with the most equity in it to 95% and accept the LMI. With any new investment property purchases get your mortgage broker to look at options available to to you as sometimes the self insured or risk fee options maybe worth considering.

 

[Shaun M Smith]

Sounds like a 90 or 95% lend is required. Unfortunatley there is no option but to proceed with another lender at a higher LVR and endure the LMI costs.

Westpac has a 85% with no LMI product however it looks like you may need slightly more access to equity.

 

[Lukey13]

Sounds like a 90 or 95% lend is required. Unfortunatley there is no option but to proceed with another lender at a higher LVR and endure the LMI costs.

Westpac has a 85% with no LMI product however it looks like you may need slightly more access to equity.

So does that mean that regardless of whether I go with a different lender (and LMI provider) I will have to face LMI on the $254K against IP1 if I add to that property another loan which pushes LVR beyond 80%? If that makes sense...

 

[Rolf Latham]

Hiya Lukey

Overall, you will have to cop spme lenders mortgage insurance.

Look at it like stamp duty,...................at least for the LMI you get something.

AS has already been said, you will have to look at moving something around to make the deal work.

If you service OK with Suncorp almost all the majors will do a 95 % refi for you.


ta
rolf

 

[Spectre]

Other option

If you dont want to re-cop the lmi or refi out of suncrop you might be able to pull off a no deposit quick start thru st george, then you only have to come up with the legals to complete - say what - 16/17k? - about $304 in LMI all up (based on your figures I think?).

Runs .5 over std variable, no packages, $750 estab so the rate isnt cheap but flip side you dont have the lmi cost on the increase or the refi. so you could cash out with suncorp progressively and refi when/if needed.

and its a full doc not a low doc

 

[voigtstr]

We recently found that lenders weren't going beyond 90% LVR as well. Ended up getting a loan with ANZ as they had all the features we wanted.

 

[Strannik]

So does that mean that regardless of whether I go with a different lender (and LMI provider) I will have to face LMI on the $254K against IP1 if I add to that property another loan which pushes LVR beyond 80%? If that makes sense...

I was in similar position as you. I have some equity in my current IP which i wanted to use to purchase another IP. If looking at taking out a new loan i would be looking at LMI for the whole amount.

What i did instead, was to extend my current loan by amount necessary to put 20% deposit on another property. That way I only have to pay only around 1k LMI on 75k loan, and nothing on a new loan. This also enabled me to actually borrow more than i would be able to otherwise, since the requirements regarding income are not that strict w/o LMI. This was with Westpac.

 

[Strannik]

actually my position was different cause i paid mortgage insurance 2 years ago, so i only had to pay it on the extra amount

 

[BayView]

Hello to all the mortgage brokers and knowledgeable persons!

I would appreciate some information and advice on my situation which is as follows:

PPOR bank valued at $385K - current loans $247K + $79K (84% LVR)
IP1 bank valued at $317.5K - current loans $254K (80% LVR)

I spoke to a MB from Suncorp today about financing IP2. She advised that serviceability would be fine (would offer another $750K of loans to me!) but equity was limited. That is, Suncorp's mortgage insurers would only allow a maximum LVR of 90% for any purchase involving use of equity from another property.

Therefore, my deposit on IP2 would be limited to:
$18K equity from PPOR (incurring LMI of $307)
$34K equity from IP1 (incurring LMI of $4.8K - due to fact I would then be paying LMI against the full amount of $34K plus the existing $254K which I thus far haven't paid LMI on)

With a total equity deposit of $52K I would be able to purchase IP2 of value up to just under $500K, taking into account purchase costs (likely including substantial LMI on a 90% lend against IP2).

Now for my questions...

Is there an easier way to do this? Preferably without having to pay $4.9K LMI just to access $34K worth of equity.

By using a separate lender (and thus a different LMI provider) would I be better off in any way? For instance, would I be able to go beyond 90% LVR on any of the loans?

Any advice would be much appreciated.

Whilst your serviceability mat be good right now, your current LVR of 82% average is high in today's climate in my opinion.

If an unexpected life event happened TODAY (and they do) which caused you to lose your job, or not be able to work for 6 months, and have to sell one of your properties........you'd be stuffed.

 

[Rolf Latham]

Hiya Bayview

I once heard the average Australian has a "No job income" life of around 6 weeks.

Thats the time they could survive before they would be on welfare.

You raise a good point in terms of risk management.

Some would argue in this instance we should borrow to the highest reasonable cost LVR and stash the dough..............say 97 %.

While the LVR is very high, the excess money buys time.

AS you say though, in todays environment, are we buyng time to get OUT of trouble, or are we buying time to get INTO more trouble because things get worse.

My clients tend to go for the highest reasonable ( for their circumstances) LVR. In some cases thats 60 %, in some cases thats 97



ta
rolf

 

[Lukey13]

Whilst your serviceability mat be good right now, your current LVR of 82% average is high in today's climate in my opinion.

If an unexpected life event happened TODAY (and they do) which caused you to lose your job, or not be able to work for 6 months, and have to sell one of your properties........you'd be stuffed.

Hi BayView

That's a very good point that you raise in terms of risk.

I must say though that I am still only looking at spending a very conservative percentage of my post-tax income on property investment - currently I have about $2,000/week leftover after taking care of my current mortgages. Even next year when my wife takes the year off (partially unpaid) for a baby, we're still going to have plenty of cash to "burn". Not to mention we've both got excellent income protection for our salaried income (as well as already substantial superannuation balances we could fall on). And failing that we've got relatives on two sides of the family from whom we will inherit several million dollars. Our family would also help us out very significantly from any financial turmoil we should find ourselves in. All in all, we probably don't need to be worrying so much about investing financially (as we're already doing fine compared to most others - relatively speaking), however I find myself obsessed with it as an obsession!!

Anyway, I think our overall level of risk is comparatively low compared to other investors. For instance, I recall somebody on this forum mentioning a shortfall on their IP portfolio of some $4K per week! Now that would be well and truly out of my comfort zone. But I do respect that kind of risk-taking.

Basically we're "cashflow rich" and "asset poor" at the moment. This is due to us basically being 10 years younger than those who bought all their property nearly 10 years ago (prior to the boom). So the way I see it is that by throwing a little extra into property investment I'm trying to balance that out a little bit more over the coming years - slowly nonetheless.

Thanks for the thought-provoking question.

 

[Lukey13]

I think I've come up with a better way to go about it on a "cheaper" purchase:

390K IP2 + 20K costs (?) = 410K total borrowing

390K x 90% LVR = $350K

Still require $40K deposit

$40K available from PPOR valued at $385K @ 95% LVR

Advantages of this:

a) No cash contribution required
b) Avoidance of LMI on borrowings against IP1

Do any of the MBs here have an rough idea how much LMI I would be looking at on the two new loans as above:
1) 390K x 90% LVR = $350K
2) Taking an extra 40K from my PPOR @ 95% which I've already paid LMI on up to 84% LVR

Thanks guys for all the help.

 

[Rolf Latham]

Hiya

Didnt you say you couldnt get past 90 % with Suncorp/PMI ?

ta
rolf

 

[Lukey13]

Hi Rolf

Yeah, that is the case with Suncorp.

However I was just trying to work out the cheapest way to use equity as a deposit by going through another lender who would go to 95% against the PPOR and 90% against IP2. So I would end up with the following LVRs:
PPOR - 95%
IP1 - 80%
IP2 - 90%

I'm assuming it would be rather easy for me to get another lender to add an extra loan ($40K) against my PPOR taking it up to 95%? Then I could have either the same lender also give me the 90% loan against IP2, or I could go back to Suncorp for the 90% loan against IP2 (if they would do that).

Would that work?

I just need to get an idea of how much LMI I would be up fair to see whether it's worth leaving the 80% LVR against IP1 untouched to avoid it. Otherwise I might be better off taking IP1 and PPOR up to 95% and go for a lower LMI against IP2. If only it were easy to get LMI estimations...

 

[Rolf Latham]

Hiya

On that basis the LMI previously paid to Suncorp will become null and void for the deal where you are chasing the 95 %, and the total PPOR loans will need to go to lender.

If the LMI paid is less than 12 mths old you may be get some form of rebate.

This will link to an "average" premium calculator, Be mindful that diff lenders and insurers have different premium rates

http://www.adelaidebank.com.au/brokers/downloads/Genworth LMI Calculator.xls


Chase it down for more detail with your broker / banker, because there are some fundamentals that we need to get over before working on the finer details


ta
rolf

 

[tobe]

Reminds me when I did my second investment purchase, I asked the broker whether it would be better LMI wise to take 90% on both, or 95% on one, and 80% on the other. It started me on a wonderful journey, and 5 years later I love the problem solving involved in broking.

Its not all about the cost, its also about the best structure to go forward, and lately also about the lenders financial position (just ask the RHG and macbank clients) so that you dont have this problem on your next purchase.