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88% LMI sweet spot

Discussion in 'Property Finance' started by SaberX, 11th Sep, 2015.

  1. SaberX

    SaberX Well-Known Member

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    So recently ive seen the resurgence of 'what LVR' is most suitable for lmi usage in preserving cash for future portfolio acquisitions. Particularly for those looking at IP2 and onwards in their early stages of buying.

    Just curious therefore what the majority were obtaining on their PPOR loans at the 88% LVR sweet spot. Im assuming a typical median house price loan of say 450k. Full offset so the bells and whistles.

    I'm sure it'll be a good reference point for others shopping around.

    It seems on the investment side loans are coming in at the low 5%+ so im assuming a PPoR 450k loan (88%lvr) would competitively pull in 4.4% or so??

    However i noted bankwests recent drop to 4.09% for 80% lvr with fulll offset so perhaps 4.4% is on the high end.

    Be curious what individual borrowers and brokers are obtaining.
     
  2. Sonamic

    Sonamic Well-Known Member

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    I think a lot of people would push that bit harder on their PPOR Loan to get down to the new LMI free 85% LVR zone that a few Lenders are offering currently? I'm looking at it myself to release a bit of Equity into the Offset for a future move.
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Your post is all about rate. Its not a consideration for me. I couldn't even tell you what rate my last deal was at.
     
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  4. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Spot on. If you've got enough to cover off a 12% deposit - try to boost it to 15% and there's a number of lenders currently doing 85% no LMI.

    Cheers

    Jamie
     
  5. devank

    devank Look, lets just get on with this, ok? Premium Member

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    Which ones?
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    STG, WBC, Homeloans
     
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  7. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Homeloans is doing 85% no LMI for investment loans as well. Its for both refi's and purchase. Interest rate of 4.84%, servicing is very generous and no credit scoring.
     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I don't mind these guys at the moment - I've started to send some business to them and so far the experience has been pretty good.

    Cheers

    Jamie
     
  9. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    If you're intending to implement an investment strategy of multiple IP purchases, BankWest is a bad choice for a couple of reasons.

    They do have a product or two with cheap rates. In fact they always have a product or two with cheap rates. They also have a consistent history of replacing products with something better about every 2 years. the cost of the old product always goes up. They've been doing this for about 8 years now.

    BankWest have some of the most conservative affordability policies in the industry. At some future point, releasing equity to access more deposits will become difficult to impossible. Releasing equity is a key part of most investors strategies.

    BankWests niche was their ability to add all of the LMI above 95%, even for investment loans. They're now restricted to 80% on all investment loans, they're now pretty much obsolete from an investment standpoint.
     
  10. Redom

    Redom Mortgage Broker Business Member

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    Until the 22nd of September, so if you're going to use this, do it quickly. Changes aren't announced yet. I suspect the product will remain the same, with rates, serviceability and policy tightening.
     
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  11. SaberX

    SaberX Well-Known Member

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    Homeloans sounds good, are they an online only? Westpac sound good but they apply a 0.25% of loan value buffer, plus their standard 1,700 fixed monthly expenses, doesnt leave my on a serviceable income considering a ppor as you woudlnt take into account rental income until property converts to so.

    d.T i was just curious how lvr affects rate rises. I know bankwest go 4.09% currently foe 80% lvr. But supposedly they don't move on pricing above 80%? I'd be curious to see what others are getting as you head to say the 88% lvr spot. Atm i can get circa 4.35% bw as mentioned but seemed others who are on investment loans are closer to the 5% mark if not higher if loan amounts higher?

    PETER, good point there. I haven't bought into the best idea of BW in that case. But given lender policy changes quite often there's a likeliness bankwest will go back to 90-95% lvr when the cycle turns around in 3-5 years... I guess no one knows the fututr in that regards.

    The only issue is going 88% lvr means any lmi paid is wasted if atttempting to refinance out to anothrr institution. That's the only shot in the foot i see going with a sweet spot lmi because no lender will let you transfer lmi credits, unless refinancing with the same financial insitution? In making the market moree fair and liquid one will hope one day lmi becomes portable.....
     
  12. SaberX

    SaberX Well-Known Member

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    The worry about old products being more expensive is worrying however. If you obtain a discount now your saying their base variable rate on the old cycled products tend to rise more than their newer cheapet products down the track?

    Given they have more conservative affordability policies perhaps they have gotten softer given i wouldnt service for say a westpac no lmi option lvr whereas i would with bankwest and boq only. Sgb would be an option but being owned by westpac they would service just as harshly?

    How is homeloans? Conservative?

    What would your thoughts be
     
  13. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    At any given time BW tends to have a 'product' which they assign a price too. Most other lenders publish a 'standard variable rate' and then you get a discount referenced to that. When you negotiate your rates, you're actually negotiating the discount, not the rate directly.

    Either can change their rates at any time, but when lenders use the SVR system, all of their clients are subject the rate changes. This is how most lenders have increased investment loans. They've increased the SVR for all investment loans, so both old and new borrowers all get the increase.

    With BW, each product tends to be isolated, so putting up the rate for an older product doesn't affect the deal they're advertising on the front page of their website. All borrowers on a particular product get a rate increase. The problem is they've have a consistent pattern of rolling over products since about 2007. BW always seems to have a fairly good deal available, but it never stays that way for the long term. They increase their rates by stealth.
     
  14. SaberX

    SaberX Well-Known Member

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    Wouldn't you just refinance every two years to one of their new products in that case or another bank(assuming you refinanced at 80% to avoid lmi or refinance to a 85% no lmi institution as per current environment, or are these only new loans applicable that westpac and the like are doing?
     
  15. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    You can often switch products fairly easily internally with BW. Realistically though many people don't think to do this so they end up paying too much over time. I've got no doubt that somewhere in BW, someone has done the statistics on their strategy and they've got a good understanding of their pricing model.

    It usually costs in excess of $700 to move lenders, often significantly more. LMI waivers are also quite rare. They pop up from time to time, but unless you're a doctor, don't plan a strategy around it.

    I'd prefer to simply deal with lenders that are reasonably upfront and open about their pricing models.
     
  16. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Homeloans is an excellent lender. Credit team is very approachable and have a can do attitude.

    Pros:

    1. Generous servicing
    2. They offer the 85% no LMI product even on IPs (for the time being) AND no credit scoring
    3. Really good rates on investment lending
    4. Quick turnaround times
    5. Decent credit policy (they accept things like bonus income which the likes of even NAB doesn't accept).
    6. No rental reliance policy (unlike their main competitor Firstmac)
    7. Excellent cash out policy again unlike Firstmac (so leave your purchases for Firstmac and your refi's for Homeloans).

    Cons:

    1. They don't have their own DUA
    2. They don't accept rental properties which are vacant - all properties must be tenanted at the time of application
    3. They do have upfront valuations but you need to pay for it
     
  17. Redom

    Redom Mortgage Broker Business Member

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    Generous servicing is all but gone from Homeloans with the Classic product off the market and the Accelerate Prime product about to change.

    Prime changes:
    • All loans to be serviced at a minimum floor rate of 7.20% or 2.00% above the standard rate, whichever is the higher
    Few other changes too, looks like the 85 no LMI deal is only available for P/I loans (but will need to confirm with BDM).

    Cheers,
    Redom
     
  18. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - it was good while it lasted :-( Guess it was an inevitable change.
     
  19. SaberX

    SaberX Well-Known Member

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    Peter, the move internally within bankwest every two years would be free of charge wouldn't it? From a fees pov and given you've already paid LMI? That said, if one wanted to move from bankwest do you or any other brokers know when the standard 18 months period ceases for commission trails to cease? For a simple purchase obviously disbursement of funds would be easy, but do you know when BW assesses the broker commissions clawbacks as - from last construction payment? Or initial land settlement?

    That said... you'd thinkt hey'd standardise LMI given there are only two lenders out there for LMI, Gemworth and QBE, so that if you stuck with them and moved to another bank using them, the insurance would be transferable. TBH it's a big rort that nobody has ever changes and defies logic... after all your underlying insurance for the security hasn't changed, just who owns the loan. Guess all people see are profit signs.

    Given LMI would be circa 5-6k for say 88%, i guess you would have to get a LMI waiver or significantly lower interest rates than current deal to warrant a move over.

    Even if you find a lender with upfront pricing models, how will you deal with changing goal posts in regards to lenders who may one day be well and truly easy to access equity for subsequent portfolio building, and the next day completely shutoff above 80% LVR.... Perhaps some banks generally stay open and flexible... although any could technically change to more conservative policies at any time?

    @Shahin - can you explain points 6 and 7? With point 7 can you explain why you'd leave refinances to HL ? What does DUA stand for iny our con #1?
     
  20. SaberX

    SaberX Well-Known Member

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    I would say many would struggle to have a tenant at time of purchase wouldn't you? Unless it was a tenanted property already, but that obviously has its cons in ruling out your purchase selection to only existing tenanted property?

    Are there any lenders who would go the sweet spow 88% LVR (or 90% still in this current market) for a property using the market rent forseeable for the property (if applied for as an investment loan) as the servicability income? Just curious given many may have a principal place of residence where assessed at say P & I by most other lenders for OFI Debt even if on an interest only 5 year loan, and therefore you'd be find servicing a second proeprty once rented, but at time of application obviously this rental income would not be available... BUt assuming you went a conservative market rental rate approach, surely if the figures stacked up a bank would fund the 88% LVR and LMI and take the rental income (forseeable) as servicability?

    Or does this just not occur?