FHB Finance

Hi all,

I'm a little bit confused with new changes to lending etc; mostly around capitalising LVR etc.

Mrs and I are looking at purchasing a property within the next 6 months. Currently have about 62K saved and will have around 75K saved by March 19. No debts. Income 94K P.A for me & 55K for her. Currently paying $550 pw rent and saving around $525 per week.

We are looking at properties between $575-610k and are hoping to put down only a 10% deposit. Which would mean a loan of $520-$550 - is this realistic on our wage? Also, we need to pay LMI, if we have a 89-90% LVR does this then mean our loan would be 92% LVR; now meaning we need to save more in order to reduce that back to 90%?

Thanks

 

Hi zuzu
Welcome to PC.
LMI can be capitalised on top of the loan, borrowing capacity permitting.
For a 610k purchase, you require 61k 10% deposit.
Being a FHB, depending on where you are buying, you may also be eligible for stamp duty waiver.

 

At a very high level the lender looks at 2 things; servicing/borrowing capacity and deposit position.

A definite answer can't be given on the servicing as it depends on your living expenses, if you have no dependents or 6, etc however based on the numbers you have provided this should be ok.

From a deposit perspective (and LVR), if this is your first purchase at $610,000 and you are eligible for the stamp duty exemption then at a 95% LVR (including LMI capitalised/added onto the loan) you will require a minimum deposit of $54,000 including legals and bank fees. 95% LVR means the base LVR is around 92% and the LMI is approximately 3%.

LMI skews at 88% and 90% LVR so if you can keep the LVR to say 90% plus LMI capitalised then the minimum deposit you require is $64,000.

The difference in LMI between 90% plus LMI and 95% including LMI is approximately $7,000.

So in other words you are paying or borrowing an extra $7,000 in LMI in order to save $10,000 in deposit. It seems from a deposit perspective you can do 90% but its also dependent on what you want to do in the future in terms of investing and if you need the funds for that.

 

Great, thank you. For the record no children and no debt.

 

Then you are looking good mate and also its a dual income app which scores well with lenders.

Just ensure you pick the right lender since you are paying LMI as you want to be able to reuse the LMI credits in the future. So a lender will a good cash out policy and DUA is key.

 

Are you looking to buy an owner occupied home or an investment? If an OO, you can add LMI onto your loan even with the 10% - no need to keep it under 90% incl LMI, although this does make a significant difference to the LMI cost.

 

Best to contact a broker and go through the process to find out what's the max amount you can borrow and also short/long term goals..

Also, ask him/her to help you find the sweet spot where LMI is not ridiculously high for the purchase price.

And awesome work on savings!!..

Good luck.

Cheers,

 

for a property worth 610k,
LMI@88LVR = 8.5K (i.e. deposit of 74k)
LMI@90LVR = 12.3k i.e. (deposit of 61k)
LMI@92LVR = 20.5K (i.e. deposit of 49k)

so for 25K more in deposit between 92 &88 lvr loan, you can save 12k in LMI.

Lenders Mortgage Insurance Calculator

 

Keep in mind LMI varies between lenders and between states (stamp duty on the premiums)

 

Or 'her'?

 

Thanks for spotting bud!.. fixed

 

Thanks all for the replies. Yes I am looking at owner occupier - when you refer to 92% LVR loan plus LMI, I thought there weren't many lenders lending above the 90% LVR?

 

Quite a few will do it for owner occupier properties, especially first home buyers. I often find that the limiting factor for FHBs is the deposit, not the affordability.

 

So some lenders are lending 95% LVR + LMI? Or 95% LVR inc LMI? Sorry, I am just confused

 

Yes it's true that some lenders will lend 95% PLUS LMI, total LVR of 98/99%

 

You can get 95% + LMI, but be prepared to pay over 1% extra for it.

 

We recently did a pre-approval for 98% LVR Owner Occupied P&I loan with an interest rate of 3.84% Variable (3.98% Comparison Rate) so you don't need to pay a high interest rate for that LVR, there are options out there.

 

Often these lenders will have higher premiums than the major banks LMI (if they did it). I did some LMI comparisons recently for about a $500k loan and it varied by about $5k per lender.

But this does not necessarily matter if you hold the loan long term on a low rate.