Help w/ Guarantor Equation and LMI

OK not sure how it's usually calculated - If I don't want to pay LMI on a property but only have 10% deposit. How is the amount of equity needed calculated? is it a 1:1

e.g for a $300,000 property w/30k deposit is $30k guarantor's equity enough to not pay LMI or is it calculated differently?

 

You must keep the LVR at 80% or below.

80% x $300k = $240,000
This would be the max loan to avoid LMI.

If using a guarantor's property as security you could have
$240,000 secured by your property, and
$30,000 securied by their property (and yours perhaps_)
$30,000 cash

Keep in mind the other costs as well such as stamp duty, legals etc

 

OK cool - just checking it was a 1:1 ratio - thanks.
I thought this was the case, but I had someone tell me it wasn't considered 1:1 for the guarantor's equity and made me doubt myself.

 

Actually it may vary depending on the bank. You should check with your broker,

 

The way a lender like St George would work it work is:

Property value $300,000
Deposit (10%) $30,000
Loan Amount $270,000

For the purpose of this example, I am disregarding purchasing costs usually associated with buying a property.

270,000 / 80 * 100 = $337,500 ( total security required).

As the purchasing property security is worth $300,000 already, all that is required is the additional $37,500 which would come from the guarantor. In the case of St George this is a limited amount and does not guarantee the whole loan amount.

Hope that helps understand the way it's calculated. Keep in mind this is only an example used to illustrate the theory and could vary from lender to lender.

 

That sounds right - lenders will want to add in a buffer too.