To avoid LMI or not ?

Discussion in 'Loans & Mortgage Brokers' started by Finds, 6th Jan, 2021.

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  1. Finds

    Finds Well-Known Member

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    The options I have been tossing up between is going with the Macquarie Offset Home Loan with 85% lend plus LMI, versus Bank First Premier Package at 85% lend with no LMI. The Bank First option looks to have all the features of the Macquarie product but no LMI up to 85%. Everything appears to be similar with the 2 products, however I have no familiarity with Bank First. I was wondering if anyone could offer an opinion on Bank First, positive experiences, negative experiences, or any thoughts on the Bank First product ?

    - No LMI up to 85%
    - 100% offset
    - Up to 8 offsets, link to transaction account
    - Unlimited extra repayments
    - Redraw facility
    - 3.08% variable rate

    Sounds pretty standard ? Any comments would be appreciated.
     
    Finds, 6th Jan, 2021
    #1
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    How much is the LMI? You need to weigh this against the cost of the higher rates over time. Consider that there's options available (with LMI) for below 2.5% (variable). I've often found that whilst avoiding LMI sounds good, you pay a significant price for it.

    I suspect you're attracted to these two lenders due to the ability to have multiple offset accounts. If that's not absolutely critical, there's likely other lenders that may be significantly better. I've got no problems with either lender, but for loans above 80%, there are others that I tend to look at before Macquarie or Bank First (which do have offset accounts, but don't allow multiple offsets).
     
    Peter_Tersteeg, 6th Jan, 2021
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  3. Finds

    Finds Well-Known Member

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    Thank you for the reply Peter. Will be between 7.5K and 8.5K depending on the price of the property I am able to secure, somewhere in that range.

    The multiple offsets was attractive and something I wanted to have but I guess isn't crucial. I initially got a spot in the 95% Commbank FHLDS but didn't continue as the interest rate cost was going to be significantly more than the low 3.00s with the 2 here I was considering, then I found about the Bank First LMI waiver up to 85% and thought it was an interesting way to maybe keep some cash in the offset as safety.
     
    Finds, 6th Jan, 2021
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  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Simply based on the numbers, I probably wouldn't go with Macquarie. Loans above 80% really aren't their niche, the LMI waiver would be worth more over the first few years and you can likely review it in about 2-3 years.

    Depending on how you look at it, the loan amount and the timeframe you want to measure it against, the LMI waiver may or may not be a good deal.

    By way of comparison, there's lenders that can do around 2.1% with a full offset account, guaranteed for up to 3 years. Over 3 years, this would be cheaper than the LMI waiver on a loan of $300k or more.

    If you measure the difference over 2 years, the Bank First LMI waiver is going to cost more for loans over $450k.

    It's not easy to make a truely fair and direct comparison without a far more detailed discussion about this.
     
    Peter_Tersteeg, 6th Jan, 2021
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  5. Watson1

    Watson1 Well-Known Member

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    Why not try St George Group as they are currently offering LMI discounts and only charging $1 up to 85%.

    First Home

    Rates are competitive with variable rates around the 2.6% mark and fixed rates are low 2%.

    This way you get the best of both worlds and they are a mainstream lender owned by a major.
     
    Watson1, 6th Jan, 2021
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  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    BF are slow at the moment.

    Their 85 % no MI only applies to their niche Market being medical workers and Teachers just to clarify.

    Mac has a Master Limit facility which if used with a well sorted active debt recycle strategy may knock 5 to 20 years off the original mortgage term, thus the LMI would be a small investment for a large return.

    As an aside, even the CBA FHLDS offer may be significantly better if the 10 % left over cash is recycled and placed into income producing assets.

    If set up the right way with the majority of the debt on a fixed 1 to 2 year rate, the interest cost vs the potential benefit is once again likely going to be huge over time.

    The challenge with doing a " current position" analysis without due consideration to the reverse compounding benefits of future investments is like buying a cheap chinese car without considering the maintenance cost outside of warranty, and the likely huge depreciation.

    ta
    rolf
     
    Rolf Latham, 7th Jan, 2021
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