If I take out landlords insurance am I likely to get a higher LVR on commercial?
ChrisgrossrealisationMember@grossrealisationJoin Date: 2005Post Count: 1,031
not sure why you think you will get a lower lvr because of insurance.
The insurance hasn’t got anything to do with lvr.
Lvr to me is loan to value ratio.
Ie value of property and the loan being a portion of that value.
Insurance can be the replacemant value but this will not change the lvr.
Currently lvr on commercial lending is normally 60% and is across the board.
I have got it to 70% but combined with residential lend and some private lending.
here to helpTerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
I agree with Gross, the two are completely separate ‘things’, not affecting each other.
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The idea of the insurance is to mitigate the risk of a situation arising in which you can’t make the repayments.
For instance if a tenant suddenly goes insolvent without warning and can’t pay the rent.
Surely if your insurance mitigates certain risks then your loan should be seen as less risky and you should be able to command a higher LVR.
I got the idea because a bloke I spoke to on the slashdot meet said he was able to pay 5% deposit on his first home instead of 20% as he paid for $3000 in mortgage insurance.Mobile MortgageMember@mobile-mortgageJoin Date: 2003Post Count: 913
The insurance your friend is referring to is LMI (lenders mortgage insurance) this insurance is applicable on most residential lending where the LVR is over 80%, this is not to be confused with landlords insurance, Cheers.
PLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.Robbie BMember@robbie-bJoin Date: 2004Post Count: 2,493
LMI = LENDERS Mortgage Insurance
It is a one off premium you are charged usually when borrowing more than 80% of the value of the property and is to cover the LENDER if you default. The LMI company will then pay the lender any shortfall and chase you for the funds.
Landlords insurance is another insurance you will also have to pay for and covers you for vacancy of the property.
You are right though… LMI lets you borrow higher LVRs. You just had the name mixed up. Unfortunately, LMI does NOT apply to commercial properties. It is only for residential.
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Thank you. I’m still learning after all.
Sounds like a bit of a heist though. Does the LMI company charge you interest on the money if they have to chase you up?
I’d rather put the money aside into a managed property trust (that pays you dividends) and that you can sell if things go pear shaped but I guess lenders call the shots.Robbie BMember@robbie-bJoin Date: 2004Post Count: 2,493