Should I pay LMI or not?

Married and 3 yr old dependent. Both working but family income under $170,000.

As of now, my PPOR equity is not enough for 20% of deposit (600K purchase)and other costs. So I have 2 options.

Scenario 1)
Pay down my PPOR loan and extract equity which will be enough for 20% of IP purchase plus other costs. As loan is 80%, no LMI here.
Redraw savings after pay down = $188,000 (against PPOR loan $390,000).
Here my total P&I repayments of PPOR and IP $4104.

Scenario 2)
Redraw savings = $230,000 (against PPOR loan $432,000)
Draw only available equity which will be only enough for 13% of IP purchase plus other costs. As loan is 87% only, LMI would be $10,440.
Here my total P&I repayments of PPOR and IP $4318.


What should I choose, can someone suggest what is the best way to go for this investment purchase ? Thanks

 

The way you've explained this is quite confusing but I think I might know what you mean.
Reduce the limit on your ppor loan and create a separate loan split to access the equity to be used for deposit and costs on the investment property purchase. Do not just use redraw to pay for the IP deposit and costs.
Get a decent broker who can help you understand this and show you how to structure it correctly.

Whether or not you should pay LMI depends on what your overall goal is with regard to property investing.

 

This doesn't make sense[

 

Easy answer is pay down PPOR and redraw for investment purposes.

Split into 2 loans.

 

Just trying to understand - Scenario 1 is better as I can avoid LMI ?
i.e paydown PPOR loan and extract equity by splitting into 2 loans.

Thanks mate

 

Can you kindly elaborate your point Terryw ?

Looks like my explanation is bit confusing.

All I'm trying to do is
In option 1) Reducing PPOR loan by paying with savings & extracting equity as separate loan for investment purposes ; So I'm avoiding LMI here.

In option 2) Will keep all my savings in offset & extract only available equity as separate loan for investment purposes ; As I don't have 20% here, I will have to pay LMI of 10K

Thanks Mate

 

Apologies for my bad explanation. Yes I'm trying to do exactly the way you explained with broker help only.

Can you please lighten my mind -
"Whether or not you should pay LMI depends on what your overall goal is with regard to property investing."


I'm just starting my investment journey. My goal is to hold properties forever. Due to limited income, I can't go for another property in near future unless my PPOR and future IP increases in value dramatically.

 

How many properties are you aiming to hold?
Keeping some deposit aside instead of using it all now could allow you to get IP no.2 sooner rather than later.
All these things you should be discussing with your current broker...

 

hmm... That is good thinking Lindsay_W. Thank you for highlighting this.
I will have to think about number of properties.

 

Correct