LVR and interest rate trade off

Discussion in 'Loans & Mortgage Brokers' started by Nervousfirsthomebuyer, 1st Aug, 2023.

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  1. Nervousfirsthomebuyer

    Nervousfirsthomebuyer New Member

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    Hi all - another first home buyer query! is it worth getting a lower interest rate with a higher LVR for a property I will live in in the beginning but treat as investment long term? I have enough funds to lever to just 70% LVR (without it impacting my quality of life at all) but don’t know if I should keep it at 80% LVR and cop a higher interest rate (6bps difference) to enjoy the power of leverage more?

    how should I be thinking about this problem / any calculations I should be doing?
     
  2. Morgs

    Morgs Well-Known Member Business Member

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    I'd just do the numbers on the scenario.. how long are you going to be in there as an owner occupier? Are you going to buy another owner occupier in future you could preserve the funds for?

    Over 6bps I am not sure it would be beneficial.... I am sure you'll have an offset setup with it for the surplus if you go to 80%?
     
  3. Lindsay_W

    Lindsay_W Well-Known Member

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    Without knowing your full financial position and future pans it's impossible to say what's best for you and your situation.
    Do you plan on buying more property? If so, would having more funds available for that be more beneficial than a slightly cheaper rate?
    Do you prefer to have some cash buffer for unforeseen/emergency expenses?
     
  4. Trainee

    Trainee Well-Known Member

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    If you are living it in the beginning and moving out later, where will you move to? And will that need money?
     
  5. Nervousfirsthomebuyer

    Nervousfirsthomebuyer New Member

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    thanks Morgs - plan to live in it 1 year and won’t be buying another property for at least 5 years id say. On your second point, are you saying if the difference is only 6bps then it’s too small probably to justify lowering leverage?

    and yes if I go 80% LVR, I will get offset account for surplus funds
     
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  6. hammer

    hammer Well-Known Member

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    Heya, this is best answered by a broker. A good one will look at your financial position, plans, hopes and dreams and work out the best compromise.

    There's heaps on here....
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    If it's going to be an investment, I'd leverage as high as possible, possibly even paying LMI (with the right bank) so you've got as much cash as possible to put toward number 2/3 +.

    The goal is always as much debt as possible for INV, as little as possible for PPOR.
     
  8. Morgs

    Morgs Well-Known Member Business Member

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    Correct. My gut feeling it better off going 80% LVR but I'd do the numbers to be sure on it!
     
  9. Lindsay_W

    Lindsay_W Well-Known Member

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    As a first home buyer you're in a unique position to take advantage of the First Home Guarantee scheme, borrow up to 95% LVR without LMI and get a rate that's the same as an 80% LVR product. This leaves a large chunk of cash aside for the next purchase, stash it in the offset (if serviceability allows of course)
    Something to consider...
     
  10. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    if you borrowed 80% ( savings the other 10% deposit) what plans do you have with that 10% ?