Are people still leveraging to 90%?

Discussion in 'The Buying & Selling Process' started by GLAM, 25th Oct, 2016.

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  1. GLAM

    GLAM Member

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    Hi all,

    Very general question.

    Are people still preferring to buy properties with 10% deposits or less where possible?

    or

    Is a safer acquisition mindset of 80% LVR the norm these days?

    I know APRA, risk profile and personal circumstances play a big part as well as portfolio phase ( ie acquisition, consolidation etc )

    Forgetting all the circumstances that may or may not get you a loan let's assume you had it your way and the bank was willing to lend you the money on your LVR terms; would you still buy with smaller deposits or is a more cautious approach preferred these days?

    Look forward to anybody's input


    GLAM
     
  2. D.T.

    D.T. Specialist Property Manager Business Member

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    Still seeing lots of 90% buys among the neighbourhoods / people i follow.
     
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  3. Hodor

    Hodor Well-Known Member

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    Had to go higher for PPOR due to lack of 20% deposit, looking to get it below 80% before (if) increasing borrowings.

    Will be plenty of people going to 90% or higher as long as it is possible. Going to 90% and putting the 10% cash in the offset can offer flexibility in the future - which could be seen as reducing risk.
     
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  4. Brady

    Brady Well-Known Member

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    I'm still having a lot of clients going to 90% - although CBA still does 95% I run through the cost of the LMI with them and most cap out at 90% base as the extra 2% nearly cost them double.
    Still get decent rates @ 90%

    As @Hodor mentioned I would have better SANF with 90% LVR paying small tax deductible LMI premium to have 10% sitting in offset for rainy day or future purchases.
     
  5. wombat777

    wombat777 Well-Known Member

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    I bought my first IP at 90% last year. My second IP this year at 80%. I'm trying to key my overall portfolio including PPOR and IPs at 80% or below ( currently at 70% based on estimated/current values).
     
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  6. Phase2

    Phase2 Well-Known Member

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    Isn't 88% the sweet-spot?
     
  7. Brady

    Brady Well-Known Member

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    Yes and no

    90% is the biggest overall sweet spot - go over it by 0.01% and cost increases by ~30%
     
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  8. Corey Batt

    Corey Batt Well-Known Member

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    Some quick anecdotal numbers on the transactions in this office over the last 12 months:

    For residential investors:

    • 60% of our business is in LMI territory, of which the vast majority is at 90% LVR maximum
    • Remaining at 80% (almost no finance below 80% LVR unless borrowing capacity makes it impossible to leverage higher)
    For Owner occupiers:

    • 50/50 owner occupier loans above/below 80% LVR. FHBers almost exclusively at 90-95% LVR's, where upgraders are almost without exception at an 80% LVR or lower.
    In terms of practicality to continue doing this - lending constraints haven't made it that difficult to build most of the early to mid stage purchases at 90% LVR. Equity releases to this level are slowly becoming more challenging compared to pre-APRA, but not impossible. Going above isn't achieving all that much in this climate and I generally recommend clients stick to 88-90% LVR where possible, else they're paying extortionate fees + interest rates for marginal gain.

    There is a significant cost disparity between 80% and higher interest rates, in general lenders will give significantly more cheaper rates if the loans are 80% LVR or lower so it's becoming a real consideration of whether it's worth going to 90% LVR and paying 0.25%+ higher rates.
     
    Last edited: 25th Oct, 2016
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  9. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Most people are still going up to 90% in my experience for investment purchases particularly.
     
  10. Terry_w

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

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    I am still seeing a lot of 90% investment loans.
     
  11. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    New investors are tending to go to 90% unless they're in a really strong equity position on an existing PPOR.

    Those with well established portfolios are going to 80%.

    These days the sweet spot for LMI is not to pay it and leverage only to 80% if you can help it. It'll work out better in the long run.
     
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  12. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - generally going to a base LVR of 88% with LMI capped on top to bring it to 90% overall.

    The benefits are threefold - LMI is cheaper, credit scores better and a lot of lenders have capped LVR's (inclusive of LMI) to 90% for IP purchases (so scope of lenders to choose from is greater).

    A lot of my younger clients leverage LMI - it's quite common.

    Cheers

    Jamie
     
  13. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Still seeing the majority of IPs at 88% + cap lmi to keep it under 90%.

    Still doing 95% + cap on owner occupier purchases particular with first home buyers. Yes they still exist :)
     
  14. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It's a shame WBC and STG just pulled out :-(
     
  15. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Havent they reduced the LVR from 97% inclusive of LMI to 95% inclusive of LMI?
     
  16. fols

    fols Well-Known Member

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    Always 80% LVR for me.
     
  17. sash

    sash Well-Known Member

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    Most are still borrowing ar 88-90%....88% is the best option as it also optimises LMI..not too much and not to little.

    personally prefer to have hard cash....as it allows you to buy more or park it for rainy day. LMI is tax deductible so most people only pay about 60-65% of the LMI cost.

    For properties around 350k that translates to about 5-7k before tax and 3000-4500 in rought numbers...so not a huge amount.

     
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  18. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - so no longer going beyond 95% :-( They were one of my go to guys in this space.
     
  19. Phantom

    Phantom Well-Known Member

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    Yep, was 97% inclusive, now reduced to 95% inclusive.

    EDIT - @Jamie Moore just saw you replied before me. :)
     
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  20. House

    House Well-Known Member

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    90% with LMI and stamps capitalized still available? I'm... umm... asking for a friend... :p
     
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