LVR

Discussion in 'Loans & Mortgage Brokers' started by Lauren1983, 21st Jan, 2020.

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  1. Lauren1983

    Lauren1983 New Member

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    I realise the answer to my question is individual but want to canvas some opinions to help me think through my decision...
    We have sold our home and will have approx $800k once current mortgage is discharged. We are upgrading to a larger family home which will be our forever home. We have found a property to purchase for $1.6M which means we would need to borrow 50% of the value of the home. We have a combined income of around $250k and know that we can easily meet the repayments. I work very part time due to young children and will increase my work over the next few years so our income will gradually increase.

    Do people feel a LTV ratio of 50% is high in this situation? A loan of $800k feels like a lot...
     
  2. Morgs

    Morgs Well-Known Member Business Member

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    From my perspective, I'd say that LVR% is on the low side.
    If serviceability is fine, and your incomes are increasing then you should feel good :)
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    If you ever plan to invest consider 80% LVR now if you can service. You can still save the same interest as before, but you will have access to funds to invest at owner occupied rates if you do plan to borrow to invest.
     
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  4. Trainee

    Trainee Well-Known Member

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    Set a goal to pay it off faster then.
     
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  5. MWI

    MWI Well-Known Member

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    This is a loan for your PPOR not an IP, so all after tax money.
    I would consider what Terry suggested borrow as much as you can and use only what you need the rest can be sitting there as a buffer or in offset account for emergency or future investments? You only pay interest on what you use.
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    #


    What we would recommend too, it is logical in most cases........... but has become problematic to implement from a deemed ethical point of view.


    ASIC demands that brokers are not paid for money that isnt used within a 12 mth period because its a direct conflict of interest in your duty to the borrower. The compliance correct way is to arrange enough money for the client so they have a weeks wages left in the offset :). The direct flow on of that, in an extreme sense, is that one must assume that ASIC must have empirical data that shows buffer funds lead to poor client outcomes................ most of the time. That is not our experience, and common sense suggests otherwise for most, but not all borrowers.

    Obviously, we choose otherwise and where our clients are demonstrably responsible with loose cash, we max the buffer wherever possible.



    We do a a bunch of mentoring work across a few aggregator and licensee platforms, and the focus on compliance vs end outcomes is scary.

    We teach Borrower end outcome MUST come first, then see if we can get the loan done in a compliant way, not the other way round.

    This and related competing commitments are a significant grey risk space for brokers and their licencees.

    ta
    rolf
     
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Depends on your own risk profile, and your family resources. The question is almost like asking should I marry person X on a public forum :).

    Only your family can make that call, after you have sufficient data to hand to make that decision.

    For some , ANY lvr is intolerable, for others a LIMIT lvr of 70 to 80 is useful since the extra buffer gives them comfort, can be used for deposits and costs, and can often be used to pay off the home more quickly than traditional means by using an active debt recycle strategy

    Please seek specific and integrated credit structure, tax and perhaps investment advice

    ta

    rolf
     
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  8. Lauren1983

    Lauren1983 New Member

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    Thanks everyone, much appreciated
     
  9. Marty McDonald

    Marty McDonald Mortgage broker Business Member

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    Just on this an 80% LVR would mean there is an extra $480K cash lying around. I would think probably more than required as a buffer! If not planning to invest them maybe a $900K loan with a $100K buffer would be more suitable.