All Topics / Finance / I own my PPOR outright, will I be required to pay mortgage insurance on IP if borrowing 106%?

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  • Profile photo of cadancadan
    Participant
    @cadan
    Join Date: 2006
    Post Count: 25

    As the title explains, I own my PPOR outright, its worth about 600k. I am looking at purchasing my first IP, and would be borrowing the lot, ie. loan would be about 106% of the IP value. Will I be required to pay morgage insurance on the IP as I am borrowing more than 80% of its value, or does my PPOR get counted when determining my LVR?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Cadan

    No the total LVR is considered when purchasing an IP so LMI will not be payable.

    In saying this however i certainly would not be cross collateralising the securities when you buy the IP and would get your mortgage broker to structure the loan so that the IP loan is standalone. You can use your PPOR to take out a Line of Credit and cover the deposit and acquisition costs from here.

    Structured correctly you will not pay any LMI yet will still borrow the full 106% you need.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Kipper57Kipper57
    Member
    @kipper57
    Join Date: 2006
    Post Count: 252

    Yes as Richard has said the loan structure is the key in making the savings with lenders mortgage insurance.

    Profile photo of dynodyno
    Member
    @dyno
    Join Date: 2007
    Post Count: 24

    Hi Caden,

    the long and short of it is; if your happy to use your PPOR as security or releasing equity for deposit plus costs, no you wont be stung with LMI.

    regards,

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