Lenders mortgage insurer said no - other options?

Discussion in 'Loans & Mortgage Brokers' started by big_ben02, 22nd Aug, 2018.

Join Australia's most dynamic and respected property investment community
  1. big_ben02

    big_ben02 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    119
    Location:
    Regional NSW
    My brother and his wife are looking to buy a house. This isn't their first house so aren't eligible for any government rebates/concessions.

    They are looking to buy a house for up to $300k and have a $30 - $35k deposit. The mortgage broker recommended Bendigo Bank at 3.89% with LMI. Bendigo approved the finance subject to LMI, but the LMI insurers said no.

    My brother's salary is $110k and his wife is self-employed as a music tutor. They're saving $400 - $500 per week (after paying rent of $315pw). The bank/LMI's won't take into account her income until she worked for at least two years, which is why I think they were declined.

    The mortgage broker then recommended Liberty Finance which can lend up to 95% but the interest rate would be 6.2%.

    I've previously offered to help them with a deposit, but I only want it to be a last resort and I wasn't thinking 40-45k (required to avoid LMI and pay stamp duty/legal fees).

    Does anyone have any other thoughts?

    Ben
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,101
    Location:
    Sydney or NSW or Australia
    At what point (how much deposit) will the bank accept LMI eg 12-15% deposit?
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Looks.like they want a lender that has their own lmi approval . Bendigo isn't one of those

    I'd say there are options

    Ta

    Rolf
     
    Propertunity likes this.
  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Three options here:

    1. I think Bendigo is insured by Genworth, so approach a lender that doesn't use Genworth. I can confirm however that all insurers require someone who's self employed to have 2 years track record before their income can be used in assessment.

    2. A higher deposit for an 80% lender will take the LMI out of the picture. This will give them a lot of options.

    3. Use a lender that doesn't mortgage insure their loans, such as Liberty, but that's going to cost.

    Rolfs idea of using a lender that has their own LMI approval in house can work well, but I think you'll find that they'll be reasonably strict on their 2 year ABN rule for an LMI loan. It would be worth their broker making a few discrete phone calls.
     
  5. TAJ

    TAJ Well-Known Member

    Joined:
    10th Oct, 2017
    Posts:
    1,214
    Location:
    Northern NSW
    That's a substantial difference between 3.89% and 6.2%. I would suggest increasing the deposit amount to overcome the LMI setback.
    Put 50k deposit down and see what happens.
     
    Dean Collins likes this.
  6. big_ben02

    big_ben02 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    119
    Location:
    Regional NSW
    Thanks for everyones thoughts. It looks like the option is really either
    1) Go with Liberty and pay a higher interest rate
    2) Them save up some more money for LMI to approve
    3) Me lend them some money to help them with a deposit to reither reduce or remove LMI
     
  7. TAJ

    TAJ Well-Known Member

    Joined:
    10th Oct, 2017
    Posts:
    1,214
    Location:
    Northern NSW
    I've never been a fan of loaning family money for obvious reasons which have been pointed out many times by forum members across many threads.
    It won't hurt them to save a larger deposit, it will help them in many ways in the long run. They'll have greater appreciation of their efforts.
     
    hobartchic likes this.
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,977
    Location:
    Canberra, Brisbane and Sunshine Coast
    Best chance of approval would be using a decent broker - the guys above are on the money. Need a lender with an LMI DUA and/or use one that has QBE as the insurer.

    Cheers

    Jamie
     
    Paul@PAS and Jess Peletier like this.
  9. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    Another year saving is hardly a greek tragedy. If the bank won't lend to them then I wouldn't either. It actually sounds like they are doing well over all and I don't see prices increasing dramatically in most places in the next twelve months.
     
  10. Big Will

    Big Will Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,517
    Location:
    Melbourne, Australia
    Not that I am a fan but maybe use another property as security? - you did say they aren’t first home buyers.

    However to me if a bank is saying no without LMI AND the insurer is also saying no, to me they might be walking on thin ice or a tightrope and if they stumble they could lose more and worse if you join in.

    Why don’t they just save up more?