Loan Tip: New Way to Pay LMI – Monthly

Yesterday I received an email from a lender announcing they will now give the borrower the option of paying LMI monthly instead of it being added to the loan.

They will need to keep paying the monthly premium until the LVR becomes 80% or less.


This is likely to benefit 2 kinds of people

a) Those selling or refinancing in a relatively short time, and

b) Those with security property growing fast.


At the moment I am not sure how the monthly repayment would be worked out.


Example how it could work

Bart borrows 90% to buy a property in Sydney, instead of paying LMI upfront he elects to pay it monthly. Loan is $900,000 on a valuation of $1mil.

After settlement he moves in and gives it a small reno and tidy up as the market rises as well. He gets it revalued after 6 months and it is worth $1,150,000 and his loan is now $897,000 making the LVR 78%.

Bart’s lender will no longer charge him LMI.

LMI might have been $20,000 up front but by paying monthly it could have worked out to be fraction of this.

 

May I know, Which lender it is ? I am currently in process of refinancing my loan and currently at 87%LVR.

 

What if the value of collateral gone down

 

I wonder if the cost compares to the upfront premium ? Agree it may be a game changer for some.
And how a suddenly increased val affects the premium ? (Mind you in 20 + years I think the present value rises are very unusual)
It is actually paid monthly, not lent by the lender ? Could be a costly cashflow perhaps for someone who is already paying 90% LVR. eg $300+ a month.
I also wonder if the LMI is deferred so that if paid out etc a clawback still occurs ? Its seems too easy for a LMI insurer to just lose premium.

I would imagine that deductibility could be as it incurred rather than deducted over max of 60months. An ATO view on this may be required otherwise each amount paid each month could be $300+ and each monthly amount deducted over 60months ? Imagine a favourable ATO view on this could be issued as the other ATO view is based on a upfront premium.

I cant help but feel someone was reading the NSW proposal for land tax and came up with the idea.

 

I think it needs more information, very interesting, but might actually work against very aggressive buying early on, as it reduces your serviablilty.

 

The lender is Gateway Bank
Monthly LMI | Lender Mortgage Insurance Comparison | Gateway Bank

 

Not answering a lot of questions unfortunatley.

 

The insurer is Genworth so this could expand to more lenders. Cant imagine gateway are funding this internally.

 

Here’s actually a podcast from a broker about this exact topic and the Genworth offer - currently not available from other lenders but he expects that will change at some point.

https://podcasts.apple.com/au/podca...sodeGuid=64873e87-6b9c-421c-9962-6635034c3651

 

Trial perhaps ?

 

Just did a quick estimation on Genworth’s website and the monthly payment looks quite attractive…

Was wondering if any other lenders were doing this too…

 

None that I know of