I have recently purchased my second investment property and the Mortgage Insurance charged by the bank seemed a little high to me.
The limit on the first loan is $353,000 and the newly created loan had a limit of $442,000. LMI charged was about $7,500. I know there are some rules where the bank 'refunds' LMI on any loans you may have previously paid LMI on already. I also understand that with total borrowings of over the 750k ish mark, puts you into the higher LMI bracket.
Are there other ways to reduce/avoid paying it (if you don't have a LVR of less than 80%?)
Appreciate your thoughts.
Short answer – no. Citibank is the only lender that (under certain conditions) does not have LMI payable for LVR's of up to 85%.
What is the value of the property? Also is it one property or 2 properties?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
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Hi Shahin,
Yes it is 2 separate properties, each with different loans setup.
According to the last valuation, the first property is valued at approx $450,000 and the second (newly purchased) is still valued at pretty much the same as the loan amount.
Thanks for your response, I know this is a very general topic, however I want to ensure I understand it properly.
Let's start again – ok so you have 2 properties and 2 loans. What is the value of each of the loans and what is the value of each of the properties?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Property 1 – Loan limit $353,000. Valuation 6 months ago $450,000
Property 2 – Loan limit $440,000. Valuation 6 months ago $430,000
Ok so you have been cross securitised. Let's park that for the time being. Do you remember how much LMI you originally paid?
If the loans were set up correctly and based on today's figure – you would be paying around $12k in LMI.
The thing is that in these scenarios – many combine the two and they paid LMI on the higher loan amount and LVR instead of paying LMI on each loan split and LVR which in turn means a lower premium.
Its too late to change now but you need to be wary of this when you are purchasing further IP's.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Thanks very much for the info Shahin.
Next time, so next time I need to ensure I pay LMI on each loan individually.
They all need to be re-structured properly. Did you originally deal with a banker or broker?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Yes, I have always gone through a broker.
I would find another broker – you should be able to find a good one in Perth.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Wow BB went thru a Broker and were still badly advised.
Unless it is to late i would be seeing if you can't get it fixed up immediately so at least you are on the right track going forward.
There aren't to many reasons i can think of why you would cross collateralise the securities.
I have written an article on the correct way to structure the loan going forward and the reasons why you don't cross your loans..
Shoot me an email if you want a copy.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi,
Although I understand what Cross Collaterisation is, I am unable to tell if this is what the bank has done based on what I am reading in my loan documents (I am in the process of checking with my broker though…)
Investment loan 1 was taken out about 5 years ago…interest only
When investment loan 2 was taken out 6 months ago…I was sent new loan contracts for both loans. Loan 1 was then also adjusted back to a 360 month repayment schedule when settlement for loan 2 went through. I was required to sign contracts for both loans.
Does this sound like the bank has cross-securitised the loan?
Like I said, I am also checking with my broker…
Thanks very much.
Yes sounds like the Broker has re-written the Contract for the first loan as well and Yes it does sound as though they are crossed.
Nice work if you can get away with from a Broker or bankers point of view but not practical for an investors perspective.
Just look at the letter of offer from the lender and see what the security address is shown as.
If only 1 security address is shown then it is not crossed.
If 2 are shown then hate to say they have tucked you up good and proper.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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