How to use LMI effectively?

Thanks sash, makes sense

Glad I read this thread. I was originally of the mindset that 20% is better. Funny enough, I actually have a savings of 60k

 

If there a document somewhere that explains this for the less tax savvy. I too am in the process of saving 20% but my head is spinning at this threads contents.

Cheers

 

See above?

 

Missed it. Ta

 

Why 20% mate?

 

This is the minimum percentage that I was told I had to save to buy a house because LMI is the devil ect ect.

 

Thanks guys & girls. Some great information here. I wasn't aware of the advantages of 12% deposit and LMI.

 

I created a very scientific graph to convey the big picture of LMI for another thread.

Here it is again, representing portfolio size:

 

Haha. So true.

People think there is something special about property compared to other investment vehicles but in reality there is nothing special with property itself - but what is special, is that the banks are willing to leverage it as an asset so much.

Purchase $50,000 worth of shares with cash and get at 20% return = $10,000 increase in net worth

Purchase $500,000 property leveraged at 90% LVR with $50,000 cash with only 5% return = $25,000 increase in networth.

Both examples use $50,000 cash except the second example shows the power of leverage where you can have 1/4 of growth in asset value and still have over double the increase in your profits.

 

Apparently you can 'gamble' with more than your money with stocks, is that how it works?