88% LMI sweet spot

Oh... I see it now.

Isn't LMI considered a capital cost? I'm not sure you can writing it off over 5 years?

Ultimately though, you've borrowed an extra 2%, the interest on what you've borrowed should be tax deductible for as long as you're paying it.

 

Yes

 

LMI is not a capital cost..it is part of the borrowing expenses and can be prorata'd over 5 years and deducted each financial year.

 

I'm not sure if I'm unnecessarily over complicating.

Say your actual loan = 495K mortgage + 5K LMI. = 500K.
All these time, I simply claim the interest on 500K = 500K * IR.

Say we deduct LMI 1K per year. Can we still continue to claim interest on total loan of 500K?? To me, that is a bit double dipping.

 

The 1k deduction would be more of value than interest on 5k. Which is like $20 per year. I believe you can claim this interest also...as it has been added to your loan.

 

88% still the sweet spot ? we're 30 months down the track from the last post....

 

thanks Rolf - out of interest, does anyone still do the old 85% no LMI similar to what Westpac did a few years ago?

 

There are lenders who will do 85% no LMI. But more importantly, are these lenders suited to your overall finance strategy at this point in time?

 

PPOR - eliminate or heavily reduce LMI is the only strategy

 

Will you be willing to pay 1% more interest rate per annum to save a 0.9% effective LMI cost?

Being a bit tongue in cheek but just pointing out the reality - it's a balance. Plenty of scenarios where it'd be better to pay the LMI than go through restrictive product options.

(you won't be finding no lmi, low rate and low fees)