LMI- how much is too much !

Hey guys and girls , It would be greatly appreciated if I can get some advice on my next move ?
I have 4 properties with the big four, 3 with cba and 1 with nab and now i do not service , I have equity in 2 properties with the cba , my next move with advice from my broker , to be able to keep purchasing and pull out some equity for deposit is to re-finance with pepper and then lend through liberty for the next property the only issue is the val from pepper came back low and I'll have to pay LMI on the two loans I've chosen to re-finance .
Their both at 80% and to take them to 88% the LMI will be 20k and 13k respectively ( LMI seems to be higher through pepper)for a deposit of roughly $73k, I'm looking to purchase in the Sunshine Coast and it seems to be growing nicely up there .
Question 1 : is my friends should I wait until the val come back higher so I don't pay LMI ( both properties are in the Sydney market so I'm not sure if I'll get the growth in the near future) and miss out on a growing market or do I pay the LMI and buy now ?

Cheers guys and girls .
P.s I hope I've given enough info on my situation .
Thanks .

 

Hey guys/girls .
Just to add I'm looking to build a portfolio and hold for long term hoping to build enough equity to purchase income producing product leaving my portfolio neutral .
Achieving semi retirement!

 

Have you considered how you're going to manage expiring IO on your current portfolio? Think carefully if it's worth buying more now only to sell existing assets in a couple of years when it all changes to P&I.

Managing cashflow is a crucial consideration and you need to think a few years down the track before you commit to a huge LMI cost.

Also consider that by using Pepper and Liberty your whole portfolio will be stuck in place leaving you with zero options to refinance even if your income increases considerably.

 

I would be inclined to wait if it was me. Too highly leveraged, high rates, and 3rd tier lenders not to mention high LMK.

 

LMI.
Bloody auto-correct

 

As Jess said, once you are with Pepper and Liberty, you will pretty much have to stay with them. If you pay LMI to pepper, refinancing back in future means you will loose the benefit of the LMI - and whilst tax deductible, it may not be good use of your resources.

To move forward, see if there is potential to increase your income.

 

The issue with going with Pepper and Liberty I think is that due to them having a niche market, they just relentlessly keep on increasing their rates at a much higher rate than the big 4 lenders. Paying in the sub 6% for IO loans is a bit too high.

I've had the same issue with Pepper which the val came back much lower. Did they show you which comparables the valuer used? The valuer used plus 6 months old comparable sales and last year's sales.

 

Thanks jins13 , I did dispute the val from pepper with two other realestate agents estimations including recent sales and they didn't change their vals.

 

Thanks twins , I have a lot to think about.

 

Thanks jess you gave me a lot to think about .

thanks jess you've given me a lot to think about .

 

Could try again after the vals expired

 

Or go to liberty for the refi and pepper for the purchase.

 

My income will not increase enough in the next few years to be serviceable with the cba as most of it is overtime , thanks to APRA.
The impression I'm getting is if this is my only avenue forward I should still stay put and not head in that direction? Because one I refi I'm stuck with them and can't move ?
Is this correct ?

Cheers guys/girls

 

Hi terry , what's the difference if I go to liberty for the refi and then pepper ?

Cheers

 

No issues refinancing - however, it is the LMI which will be a waste, should you have the option to move lenders later later on. The property value will need to grow for you to refinance at 80% - alternatively, if you wanted to refinance again at higher than 80% LVR, then you will have to pay LMI on the whole loan balance - which will again eat into your equity.

In my view, it would be better to refinance at 80% instead - UNLESS you feel that the market is rising, and you will make more gains than the LMI paid in a short period. 80% will provide flexibility later on.

 

Thanks twins
correct me if I'm wrong but if I refi with pepper and borrow with liberty am I at their mercy when I/O becomes P/I, meaning I won't have the option to refi or negotiate anywhere else ?

 

Just depends on your serviceability at the time - if income increases, then it will open up options.

Best would be to discuss with your existing broker to figure out what income you need to increase your borrowing capacity, before you make any decisions, and work backwards to figure out how you will get there. This would be based on current lending calculators - we just don't know what is around the corner with the lending rules.

 

A new valuation

 

Hi Rolf
I've noticed the LMI is crazy with these guys , I'm thinking if I have to go down the pepper and liberty road I'm best to keep it under 80% , no LMI .
This will give me more options later on with refi as their interest rates are high if I need to .
Cheers