Hi, everyone
I’m a new member and would like to ask a very tricky question
We are planning to use our own house as equity to buy an investment property
I had paid LMI when I bought my house
If I take out the 2nd mortgage from my own home now to avoid the investment property LMI
I will probably need to exceed 80% value again
How much LMI would I need to pay
Can I just pay the difference .
Example
My home market value is 480k, I still owe 300k
I need 100k for the investment property
Which will boost up my total borrow to be 400/480 which will attract LMI again
How much LMI would I need to pay(I paid once when I first borrowed)
And is it wise to structure my loan this way?Thank you
Hiya
welcome aboard.
If you paid LMi previously than you will only be required to pay a small top up fee on the existing LMI policy linked to that loan. Your lender will be able to advise on the amount.
cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks Jamie
I’m so happy to hear that…At the same time, if anyone could advice me use 2nd mortgage and just pay top up for LMI are better or pay LMI on the investment property itself is better.
Will they be different from tax aspect?Hi Cham
First welcome to the forum and i hope you enjoy time with us.
Depending on the numbers and who the current lender is the figure will vary but my personal recommendation to clients is usually to minimize the amount secured against their PPOR and maximize the borrowing secured against the investment property.
Premium rates will vary between lenders and mortgage insurers however if the premium is charged because the borrowing is for investment then the amount is considered a borrowing cost and becomes Tax deductible over 5 years or the term of the loan.
Your Broker should be able to give you some ideas and options.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks James Bond (QLD007) for the warm welcome
Your answer gave me a new question, what is the difference to secure with ppor or ip?
As far as I know, whatever I borrow for ip from my ppor is also seen as the buying cost
So why is it better to use ip rather than use some from ppor to save LMI ?
Sorry if I sound stupid cos I’m really new
Thank youHi Cham
I am not necessarily saying you will save $$ by using your IP over your PPOR however most investors do not want their PPOR being at risk for their investment properties.
As LMI premiums are calculated on both a dollar amount as well as lvr you may find out that using your PPOR might end up costing you more.
As i say it comes down your risk tolerance level and your long term objectives for investing.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Theres one thing in the scenario above that has never been totally clarified to me in terms of tax deductibility of LMI.
Taking Cham's situation where he is using equity in his PPOR for a deposit on an IP. Using his figures of:
PPOR loan – $300K
IP loan – $100K
PPOR value – $480K
New LVR – 83.3%
Say for arguments sake assuming no LMI paid before, at the above LVR, LMI is $3000.
Would the full amount of $3000 LMI be deductible as it is the loan for the IP taking it above the 80% threshold, or would the deductible amount be a ratio of IP/PPOR which in the above case would be 25% of $3000? Or something else?
Is someone able to clarify for me?
Cheers
Tom
Thanks Qlds007
You have been so helpful
Hi Tom
If the premium was charged on the top up loan secured against the PPOR which was used for investment because the loan was now over an 80% lend then the entire premium would be deductible as a borrowing cost.
Assume Cham owned a pogo stick which the Bank agreed to take as security for an investment loan and because of lender policies they charged $1000 application for pogo stick loans then as the purpose of the funds was for investment the $1000 would be fully deductible.
Had the loan been made on Cham's new unencumbered PPOR no application fee would have been charged.
And when you find that magic pogo stick lender let me know.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Which state and area are you looking to buy? Also the first thing you should do is order an upfront valuation on your property to confirm the value and in turn the equity you have.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Whether an upfront val is available depends on the lender – some will require a full app be submitted before a val can be ordered.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Cheers Richard for the clarification.
Will keep an eye out for the pogo stick lender. Think I came across them once before when I convinced them to discharge some magic beans in exchange for a cow.
Cheers
Tom
Hi guys, i am also new to property investment and have a similar question
I am refinancing my home and have borrowed for and investment also.
I paid LMI on my PPOR when i bought it, can this insurance be carried over to the new lender i have refinanced with because with the new property my LVR is up at 87% . I never thought to ask the new lender this
Thanks
The LMI will not be transferrable. Why do you want to refinance? Is it because of the rate? If so, then most often you can can get your current lender to match the rate on offer. If its policy related then thats a different story. When did you purchase the property and who is your current lender?
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
I am refinanced with anz just to get back into a mainstream bank.I was with Homeloans LTD but their branches had dwindled down to 1 in all of Perth. No atms and only online banking. I purchased my PPOR about 6 years ago.
Hi prospector
As has been mentioned the LMI cannot carried forward to Anz however had you structured it properly you would have probably saved yourself a considerably amount in premiums.
Of course it was not in Anz Banks interest to have advised you of this as they get the best of all worlds, refinance, cross collateralised securities, LMI on both loans and then a commission from PMI for the premium charged.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Also forgot to say not all lenders insure their loans and the odd one will waive their LMI premium to 85% lvr.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
