Adding LMI to loan value.. or not?

Discussion in 'Investment Strategy' started by DOSHman, 21st Jul, 2021.

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  1. DOSHman

    DOSHman Well-Known Member

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    I just read an interesting piece advising its a bad idea to add the LMI value to the overall loan. Their point was that you will then pay interest on that value over the loan term which could become costly.

    Is there much merit behind this?

    If a reasonable cash buffer is in place, is it best to cover the LMI through that? .. or add the LMI to the loan value and save the cash buffer for next deposit?
     
    DOSHman, 21st Jul, 2021
    #1
  2. boganfromlogan

    boganfromlogan Well-Known Member

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    i have added in the past with no worries.

    I can see the point, maybe it is best for PPOR if repayments are a stretch? To pay LMI out?

    Most ppl getting LMI are not flush with cash for a PPOR, so that advice would be relevant.
     
    boganfromlogan, 21st Jul, 2021
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Think about it

    If you have a $100,000 purchase price with a $85,000 loan and $2,000 in LMI you would be borrowing $87,000. Or you could go for an $87,000 loan with you paying LMI with cash. Net result is the same - but with some lenders the LMI might be slightly different.
     
    Terry_w, 21st Jul, 2021
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