Hi all,
We have finally exchanged contracts on our second IP and had planned to use a LOC from loan #1 to add to the deposit on loan #2 but now I am a bit confused about what my mortgage broker is telling me in regards the structure of our loans. Apparently we can't capitalise the LMI on the LOC so she said we'll just have to refinance our existing loan and use the equity. Is this cross collateralising??
Could someone please look at my figures and suggest how they would structure the finance?
IP#1
Valued at $370,000
Current loan amount $291,000 IO
Approved for increase to 85% LVR
LMI payable for 85% LVR $6K (according to broker)IP#2
Purchase price $369,000
Loan inc costs $383,000
Savings in offset account $40KLook forward to any suggestions!
Cheers,
K
Slightly confused myself but at 85% LVR you would be able to normally capitalise the LMI.
Richard Taylor | Australia's leading private lender
Just spoke to the Mortgage broker and she said that its common for them not to allow this with LOCs -we are with newcastle permanent. Should we go ahead and increase the existing loan? she assures me that they will still be kept separate and that only if i didnt increase the loan, that it would be cross collateralised…. I'm so confused!
Must admit never heard of it on a Line of Credit with any lender we deal with.
Usually it would be 85% + LMI.
If in any doubt i would be using a separate lender.
Richard Taylor | Australia's leading private lender
Thanks Richard, I'll look into it further. So should i try and avoid the other option she's suggesting with the existing loan?
Hi Richard,
i just realised that i had my figures wrong
and the property was actually valued at $350,000 (damn those overly conservative valuations!!) and the LOC was to be increased to 90% LVR. I guess this is what makes the LMI un-capitalisable??So I'm now thinking of putting less of my own cash down on the second mortagage and just pay the LMI upfront in order to stick with the LOC and avoid cross collateralising. After all, the LMI is technically capitalised – just on the other mortgage by way of increased required borrowings.
So the numbers would be:
Loan #1
Valued at $350K
Loan amount increased to 90% LVR = $315K
Current balance of loan = $291K
Available for withdrawal through LOC = $24K
LMI to pay upfront = $6KLoan #2
Purchase price = $369K
plus costs = $383K
minus cash deposit of 34K ($40K-$6K for LMI Loan #1) = $349K
minus LOC $24K = $325K
= 88% LVR
= LMI of $5K (capitalised)Does this sound like the best way to go?
Regards,
K
and the property was actually valued at $350,000 (damn those overly conservative valuations!!) and the LOC was to be increased to 90% LVR. I guess this is what makes the LMI un-capitalisable??You must be logged in to reply to this topic. If you don't have an account, you can register here.
