Reclaiming LMI

Discussion in 'Loans & Mortgage Brokers' started by hvdw87, 26th Sep, 2020.

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  1. hvdw87

    hvdw87 Well-Known Member

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    Hi mortgage experts,

    I was wondering whether someone could shed some light on the ability to “reclaim” LMI.

    We purchased a property earlier in the year that settles at the end of the year. We are very confident we purchased at about 10% under market value and took an 88% lvr loan with Westpac. The bank did a deaktop valuation and told me it was all good and came in spot on (whatever that means). I tried to get more clarity on the valuation, but unsuccessful.

    Anyway, given when we bought and the potential market conditions at settlement and beyond, I was interested to understand whether there is any opportunity to reclaim the LMI that has been factored into my loan if say at settlement a bank valuation came back at 80% lvr?
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    ANZ will do a partial refund of LMI within 12 months, but I don't think Westpac do.

    Keep in mind that you set the market value when you purchase. You and the vendor agree to a price to exchange the property, thereby setting the market value at that point in time. There is a very good chance that a valuation in the hear future will be heavily influenced by what you paid for the property.

    Also a desktop valuation is effectively an RP Data report with some parameters set by the bank. There's not much to see. You'll find that most brokers are happy to share valuation reports, but going direct to the lender usually doesn't have the same result.
     
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  3. hvdw87

    hvdw87 Well-Known Member

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    Agreed Peter and thanks for the feedback. Was interested in whether this is a possibility at all and what sort of time limitations apply. Sounds like Westpac don’t offer this anyway so might be stuck.

    Interested to understand how ANZ determine how much to refund?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Refunds of LMI were possible years ago, but then all banks stopped doing it. Recently a couple reintroduced it and one was ANZ from memory, but I think it only applies in limited circumstances such as discharging the loan within the first one or 2 years.
     
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  5. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I can't recall off the top of my head, but it's in the order of about 50% in the first 12 months. It's kind of irrelevant in your circumstances, they won't refund the LMI you paid to Westpac.
     
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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Reuse the LMI, pay a small top up premium and do something useful with the cash out ?

    ta
    rolf
     
  7. hvdw87

    hvdw87 Well-Known Member

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    Hi Rolf,

    Can you explain this some more? Certainly interested in utilising that cash for something returning more than 2.5%!
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    If your property value is now at 10 % higher, that extra 8.8 % may be extractable for


    Property deposit
    Shares/Equities
    An Active debt Recycling strategy
    A business​


    etc

    ta
    rolf
     
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  9. hvdw87

    hvdw87 Well-Known Member

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    Ah ok, so essentially drawing out equity back to the original 88% lvr with a small cost (presumably much less than the original LMI)?

    I like option 3 from above.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    How much was the original loan pls ?

    ta
    rolf
     
  11. hvdw87

    hvdw87 Well-Known Member

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    Approx. $920k
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Making Some assumptions

    your val estimate now is 1150 k

    get a separate loan to 88 % of the new value = 92 k

    Total Premium = 21 k approx minus what you previously paid

    or if you limit the cash out to 79 k, the total premium would be 17.5 minus what you previously paid

    Loans aint loans :), sometimes there are little thing which are simples, jut not obvious


    ta
    rolf
     
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  13. hvdw87

    hvdw87 Well-Known Member

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    Great! From memory my LMI was just over $17k so the second scenario essentially cancels that out.

    I presume that with this I would be locked to Westpac as they have the underlying insurance? And as such limited to their valuation? I guess that does not matter so much as I presume there is no time limit on doing this and that I could continue to (serviceability permitting) extract equity up to that 88% mark with little financial penalty?
     
  14. Snapper

    Snapper New Member

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    Hi Team
    Came across this post and looking at ANZ for a refinance. Please if someone can confirm the OP seems to have been asking if he can claim back LMI paid originally when a followup Val showed above 80% LVR within 12 months of settlement. Is this possible still with ANZ from what you know ?
    Thankyou!
     
  15. Colin Rice

    Colin Rice Mortgage Broker Business Member

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