HI, I want to borrow more against the increased equity/value of my house.
Old valuations : Two houses both were valued at 350K each (in 2008) with borrowing of 305K each – One investment property and one owner occupied (i.e. I had paid mortgage insurance ).
New valuation: My house has come at 410K and investment property at 420K.
Borrow upto 88% : I went and had a chat with the bank and they went really funny. They said that due to the global financial crisis they need a financial plan. I meet the bank financial planner and he said it would cost me 2.5K to do a financial plan
Borrow upto 80% : I think I will just go upto 80% of the new valuations for now (410 + 420 =830 ) (80% of that equals 664K). I have already borrowed 305 * 2 = 610. This means I would be able to borrow 664-610 = 54K more – though I have not asked them about this
Now the questions
· Can the bank prevent me from borrowing upto 88% of my house.
· Can the bank prevent me from borrowing upto 80% of my house (with the increased value)(i have not asked yet a i straightaway asked for 88% – If they are being problematic i might need to tone it down).· Costs : I have paid LMI once before (9K) , will the new borrowing (if the banks allow) only be LMI on the differential i.e. to borrow say 110K more LMI = 1.5% of 110K.
· Have you ever heard of the need for doing a financial plan before? To increase borrowings on a house. I thought people do it all the time to invest somewhere else.
· Real question : What do I tell the bank as the purpose of my investment which woudl result in no quetions. I want to borrow for investing purposes.
My salary is fine — 120K so repayments should not be a problem and I am financially frugal.
Yours is a common question and one we get asked a lot especially when clients are looking at releasing equity in their own home.
Every lender is different so it is is hard to comment without knowing who the lender is but Yes most lenders want to control where the funds are going and seem to think that if we or another financial planner produces a FP then everything suddenly becomes all ok.
Now some answers:
Can the bank prevent me from borrowing upto 88% of my house. Yes they can as they have the funds you want.
Can the bank prevent me from borrowing upto 80% of my house (with the increased value)(i have not asked yet a i straightaway asked for 88% – If they are being problematic i might need to tone it down). Yes they can.Costs : I have paid LMI once before (9K) ,will the new borrowing (if the banks allow) only be LMI on the differential i.e. to borrow say 110K more LMI = 1.5% of 110K. Yes it will be although bear in mind LMI rates might have gone up since you took out the first loan.
Have you ever heard of the need for doing a financial plan before? To increase borrowings on a house. I thought people do it all the time to invest somewhere else.Yes all the time
Simple answer is tell them you are going to refinance elsewhere unless they agree to it.
Richard Taylor | Australia's leading private lender
So what are my real options
1. If I move bank (my lender), do I need to pay Lenders Mortgage insurance (LMI) again or does it move with the loan. This is one single thing that will prevent me moving.
2. The house that i live in has No break fees – I have been with the bank for more that three years
3. Investment property – I pay interest in advance each year – so am fixed till 30june. This can also be a problem. I will again need to pay interest in advance this year as well. A little bit of a hit is fine.
Bottom line is that I need the funds (up to 80% and ideally upto 88% of the combined value) and will move if the bank does not let me borrow more. I am happy with their product (5.98% on a Line of credit – big 4 bank) but will move.
I am assuming if I move the other bank will value by houses again (off course). If anyone on this forum think they can refinance me in a cost effective manner please let me know your email address.
The other thing, as i am happy with the existing product, is to talk nicely to the currnet bank and see if they can do anything- all i want to do is borrow against my existing equity – what is the correct reason for borrowing which the banks will not be able to refuse – MBA , want to buy another property , want to take this money and go to another bank for the next property etc.
I did an internet search – if my move banks i might have to pay another LMI.
I did some thinking overnight – My main financial goals should be satisfied if I am able to go to 80% of the combined value of my two houses – If my valuations were a little better then I can go to another bank – borrow 80% and not be liable for paying another LMI.
Please let me know if you have any recommended mortgage refinanciers. Please email me on [email protected]
I did an internet search – if my move banks i might have to pay another LMI. -> Yes
Why not you ask richard to consider the option?
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