Re-financing

Hi people,

I've noticed on a lot of these topics a lot of mortgage brokers weigh in with their opinions, so I was hoping to abuse that knowledge now.

I'm currently in talks with our mortgage broker who doesn't seem very helpful, although it may be me not getting the answers I want!

Here are the facts:

- Currently living in owner-occupied unit
- $80k equity ($310 value, $230 owing)
- Want to sell up and move on
- Have found a perfect house to buy, which is tenanted currently (estimated purchase price $380,000)
- Am willing to purchase new house and retain tenants, keep it as an investment until we can sell our unit, at which point we would move into the new house.
- Mortgage broker said there is no way to avoid LMI of approx $10k as the bank won't let us re-finance our unit to 100% to drag the equity out
- He says the only way to do avoid the LMI is to sell our unit then use the surplus funds as a deposit on the next place. We'd do this if we weren't worried about losing the next place.

So, over to you guys. Is there any way of dodging the LMI and still selling our place after purchasing the new one?

Should we just forget about the new place and concentrate on selling our place?

Keeping our place isn't really an option as the values in other suburbs are looking much better, both growth and rental return-wise so we will park some cash in an investment shortly.

Thanks people!

What you need is a simple Bridging Facility.  This will provide you with a loan that can incorporate all your purchasing costs and property value (of the new property), while you are marketing the existing one. Your capacity and servicing will be calculated on the end debt (ie After you have sold your property and put the surplus funds into the new loan)

This type of loan does have it drawbacks, particularly if you do not sell your existing property, but it would suit your circumstances.

It is easier explained in person, so call or email me for more details if you like.

I hope that helps.

ps - If your existing Broker could not suggest this, send him back to the used car lot and deal with a professional.

Tim O'Shea
Mortgage Plus
mortgageplus2007@gmail.com
0419774487
Residential, Investment, Commercial, Development and Non Conforming Finance.

Hi Fuel

It sounds to me like your existing broker has little or no knowledge or experience and has probably come from the sausage factory. If it doesnt fit first time say no and move on to the next client.

Depending on the actual valuation, your income and a few other factors you could look at a relocation style loan.

Sounds like might be time for you to do the moving on. 

Cheers

Yours in Finance
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
www.tayloredfinancialsolutions.com.au
richard@tayloredfinancialsolutions.com.au.
Lodoc loans from 7.14%

Hi Fuel80

Considering that the new place would be your second property ontop of the natural legal fees and bank fees (however tiny those may be if procured by the brokers above) your stamp duty alone would be close to $13000 so if your broker is telling you that you will need to pay LMI i dont think its because he has little or no knowledge it could just be that he is trying to make you aware of the worst case scenario.

Firstly he is right you avsolutely cannot refinance up to 100% on your current property to take out the equity and even if you could you would then need to pay LMI on that property (LVR > 80%)

Now if you are considering doing that then i assume you need the money for a deposit & or to cover the costs of your purchase.

If you wish to avoid LMI all together then you can refinance your home up to 80%, assuming that with your present loan it would cost you nothing to do so this would give you $18,000 extra.

Lets say that you spend $13,000 on stamp duty and $2000 on the costs of your new purchase including legals etc this would leave you with $3000. To avoid LMI on the new property you will now need $71,000. If you have this amount then it is more than possible to avoid LMI. If you dont have it, i would assume you may need to pay LMI.

I do think though you should speak to Richard, if there are "a few options when it comes to this" you should definately check it out theres no such thing as to much informatio when it comes to these things.

All the Best!

Mortgage Insurance might not even apply. In a lot of cases, you can place the loan with a 'Self Insured' funder, and significantly reduce your borrowing costs.
There is certainly more than one way to skin a cat.

If you are looking at a full doc loan (if you are PAYG employed or have Full Financials) then you have to decide how much you want to get the new property and go for it. One option to keep as much money left in your property at the end of the day would be to absolutely max out your existing property, to 90% + LMI in most cases, and use the funds to take out a loan for the new property. The new loan can be done without LMI in a lot of cases (with a Risk Fee instead) up to 95% + Risk Fee.
If you meet the no LMI policy, that alone will save you a couple of grand, and because you are selling your existing property in the very short term, you will be able to abuse the refund policy of the insurers. In most cases, if you pay the insured loan amount out within a short time, you will get a large chunck of your LMI premium back. The more you can borrow on your existing property, the lower the LVR will be on the new purchase, and the more your LMI refund will be.

If your existing property is worth 310k, then you should be able to free up about 49k.
Use your 49k for a 30k deposit on the new place, and keep the change for duties etc, and moving.
You now need a 92% LVR on the new O/O purchase. No worries (Unless you forgot to tell us you are a 7 time discharged bankrupt etc)
Move in to the new place. Sell the old place. Get a refund of 40% of the LMI you had to pay for the increase on your old loan.
Pay any of the leftover cash from the sale back into your loan to reduce the interest and retain as available redraw ' just in case' you need to access it in the future.

That might be one way to tackle the problem, but like Richard and I said, a 'Good' broker can help, and someone that does not think outside the square just assumes LMI is evil, everyone must pay it and everyone needs a 20% Deposit.

If you consider how much more expensive a suitable property is likley to be by the time borrowers save additional deposit funds etc, them most of the time LMI works out to be a pretty good deal.

You just need to learn how to work the system.

Let me know if you want help with the above suggestions.

Tim O'Shea
Mortgage Plus
mortgageplus2007@gmail.com
0419774487
Residential, Investment, Commercial, Development and Non Conforming Finance.

Hi Tim,

Quick question, do you know of any self insured funders that do not have an LMI equivalent fee, basically one that will lend above 80% without any fees to do so?

Many Thanks.

Lady,

See my most recent post on the High Density Unit post for more details.

Any other questions, I am happy to answer.

Thanks.

Tim O'Shea
Mortgage Plus
mortgageplus2007@gmail.com
0419774487
Residential, Investment, Commercial, Development and Non Conforming Finance.

Thanks Tim,

I also checked out the ING product spec for REF not bad.

Have a great day!