Refinancing IP

Hi good people

I have a financial question in relation to when should you consider paying again LMI on refinancing a sound decision.

There is potential of saving on interest rate but looking at payback of 4.5 years on the 2 loans.

 

I agree with Rolf - 4.5 years is a long break even. Is it possible to reduce rates or fix with the current lender?

 

why do you have to pay LMI - is the value lower than before or are you increasing the loan?

 

For financial saving reasons alone - no.

If it helps you get to where you want to get to; e.g allows another purchase or more funds in bank as risk management - definitely worth consideration.

 

Keep in mind the tax consequences

Any unclaimed LMI may be deductible in the year the loan ends
Any new LMI also also be deductibe - over 60 months.

 

Thanks to you all for the comments.
Yes this will be to increase the loan and hopefully access equity for another purchase. The LVR will still be 87% for each of the two loans hence the LMI charge.

If the property value increase big enough in the next 2 years then that will cover the LMI cost but whether that's a pant worth pursuing or not considering it will be twice LMI paid for the same loans

How much equity would be considered worthy taking the risk of paying another LMI. Guidance provided so far seems to suggest around 40k. Is that somethinh worthy it?

 

Consider the tax implications of incurring LMI for a property yet to be purchased:

Tax Tip 33: Deductibility of LMI https://propertychat.com.au/community/threads/tax-tip-33-deductibility-of-lmi.3425/
Tax Tip 34: Deductibility of LMI on loan increases https://propertychat.com.au/communi...-deductibility-of-lmi-on-loan-increases.3456/
Tax Tip 35: Is LMI Deductible in These Situations? https://propertychat.com.au/community/threads/tax-tip-35-is-lmi-deductible-in-these-situations.3493/

 

If you stay with the current lender your LMI will be greatly reduced as you can get a rebate on what you've already paid. It's likely your best bet will be to negotiate better rates and stay with your current lender - unless of course cash out over 80% is against their policy or similar.

 

Thanks Terry_w I hadn't realised that until the funds are used can't claim deductibility for the LMI as well as that only a portion might be allowed.

Much appreciated for all the comments.

 

Question - Im with the CBA and my LVR is at 80% I have already paid LMI on this loan , I need to refinance to a second tear lender for the purpose of releasing equity above 80% to purchase another property, as the CBA requires me to leave my LVR at 80% , so I would be effectively paying the full LMI twice but I see no other way to keep moving forward .
Is this a common obstacle ? If I were to try and avoid this it would slow me down dramatically.
Your thoughts would be greatly appreciated.
Cheers

 

Why? Cba has given cash out over 80 before - is there a particular reason why you can't?

 

Thanks for your prompt reply jess, my borrowings with the CBA is over $1 million and because of this I need to keep my LVR at 80% , since my loans are at 80% LVR to get access to some equity for next deposit I need to refinance with a second tear lender as they are not regulated by APRA and will allow me to withdraw my equity leaving my LVR obove 80% .
Therefore paying my LMI twice .

 

Are you sure the prob is the CBA and not the LMI insurers ?

The reality is, is all moving to 80, but I had one recently where a lender said 70, credit is shrinking IMO and will continue for a while till it all sorts itself out in the wash, but your likely to still have prob with insurers calcs....until they decide they need more money and find a new way to bleed people.

 

I understanding what your saying , if I'm correct and this is a move I need to make to keep accumulating , what I'm asking, is this a scenario that investors face whilst growing their portfolio?

 

As said, credit is shrinking ATM, lot of lending changes, pretty much anti investment.

LMI depends on your income and servicing pretty much, it is pretty much back to 80 now, you can do more, but that is looking more like mainly FHB, if you have strong income though, it will prob help, but you will hit a wall at some time, at 80 if you have income and can generate deposits and costs, nothing stopping you, just change lender.

 

Cba have an open lmi policy. That is they don't need to refer to lmi if it fits their policy.
They do need to refer to lmi for loan amounts over 80% and $1mil.
It looks like your broker banker has you xcolled? Is that is what has pushed you over $1mil?
Restructured it might still fit at cba.

 

Yes it is common for those above 80% LVR.
Rather than pay LMI I would try to get it done with CBA first.

 

Thanks for the reply but I have tried to refinance with the cba they were the ones that told me I had to leave my LVR at 80% due to the amount I have already borrowed with them therefore through advise of my broker I should switch lenders so I can access above 80% .

 

Get a second opinion from one of the brokers above. It could save you $10k or so.