I was talking about as a % of the value of the property. Are you saying that when all costs are thrown in that banks don't end up lending 100% or more of the value of the property?
'Twould seem ta me that's wot he stated mate. When he said "you can't get a 100% loan from a bank - 95% is the most you can get these days, from a bank. That still means an investment of between 10% to 15% though" - Today ('n not too long back), here:
I was talking about as a % of the value of the property. Are you saying that when all costs are thrown in that banks don't end up lending 100% or more of the value of the property?
Every bank can set there own lending policy so it's hard to give you a hard and fast rule that covers all lenders perfectly, but essentially almost all banks only lend to 95% including mortgage insurance. Any stamp duty and legal expenses also has to come out of the borrowers pockets. Stamp duty varies from state to state, but I allow 5% unless the buyers get a rebate or first home buyers discount.
There are a couple of lenders who will push the loan size up to 97% - eg ANZ but only under some circumstances. There is one non-conforming lender who will go to 99% including LMI but they are more expensive and just don't seem to offer any real benefits as the insurance premium is higher. So as a rule of thumb I suggest you stick to 95% including LMI which means it's a 91.5% loan plus LMI.
Sorry if that sounds confusing.
Take risks - if you win you will become wealthy, if you lose you will become wise
OK. Lets turn the laser on. Why did you completely avoid the point I raised about the mortgage insurance? You may think fraud is cool but lawyers don't. Especially if it's going to save their client potentially Billions in payouts. Every fib on every mortgage accepted by a bank runs the risk of null and voiding the mortgage insurance. And here's the head kicker. The people who lied (or had the cowboy broker lie for them) are the ones MOST likely to default. The banks knew (and know) full well the brokers are fabricating applications but the sickness in business today of only seeing as far as the next quarterly bonus means it's left to "the next guy" to handle.
OK. Lets turn the laser on. Why did you completely avoid the point I raised about the mortgage insurance? You may think fraud is cool but lawyers don't. Especially if it's going to save their client potentially Billions in payouts. Every fib on every mortgage accepted by a bank runs the risk of null and voiding the mortgage insurance. And here's the head kicker. The people who lied (or had the cowboy broker lie for them) are the ones MOST likely to default. The banks knew (and know) full well the brokers are fabricating applications but the sickness in business today of only seeing as far as the next quarterly bonus means it's left to "the next guy" to handle.
But you won't touch the issue. Nothing to add.
Here is what you said verbatim -
Quote:
Let's start with mortgage insurance. When the underwriters get hit for Billions to cover a tsunami of failed mortgage payments, they will crawl over every letter fold and bent paperclip to find reasons not to pay. If I lie on a claim saying I'm a non-smoker and I explode getting hit by lightning, the insurance company won't pay out. Because it saves them a lot of money. What do you think they'll do with all those mortgage broker "massaged", signed and notarized affidavits? (as if they're not already aware they're off the hook in many cases)
"Oh look, you said you earned $87,000PA but you only payed $12,000 in taxes... hmm.. either you're defrauding the government or the bank. Which is it..?" "THE MORTGAGE BROKER MADE ME DO IT!" Bank eats the loss.
Which is exactly what happened on that 4 Corners Report, if we recall. Poor old biddy hustled through a word puzzle of "exaggerations". The ANZ CEO had to take care of it personally...
If you can rewrite that in an intelligible English format I'll be pleased to answer it.
Take risks - if you win you will become wealthy, if you lose you will become wise
Every bank can set there own lending policy so it's hard to give you a hard and fast rule that covers all lenders perfectly, but essentially almost all banks only lend to 95% including mortgage insurance. Any stamp duty and legal expenses also has to come out of the borrowers pockets. Stamp duty varies from state to state, but I allow 5% unless the buyers get a rebate or first home buyers discount.
There are a couple of lenders who will push the loan size up to 97% - eg ANZ but only under some circumstances. There is one non-conforming lender who will go to 99% including LMI but they are more expensive and just don't seem to offer any real benefits as the insurance premium is higher. So as a rule of thumb I suggest you stick to 95% including LMI which means it's a 91.5% loan plus LMI.
Sorry if that sounds confusing.
Alrighty. Thanks for the explanation. I had the idea that some loans ended up being greater than 100% of the asset value.
Alrighty. Thanks for the explanation. I had the idea that some loans ended up being greater than 100% of the asset value.
That could happen only if other property was also put up as security in addition - e.g. Parents going guarantor with their own house / assets on the hook as a result in the case of default. In effect this means the LVR (and risk of loss for the bank) is much lower than it appears.
Alrighty. Thanks for the explanation. I had the idea that some loans ended up being greater than 100% of the asset value.
That did happen years ago, certainly did before the GFC.
The thing is, hardly anyone wrote 100% loans because the LMI cost was so high. Lots of lenders advertised them to get enquiries from potential buyers, but brokers steered away from them wherever possible. It's basic maths. In those days I could do a 97% loan plus LMI cost of 2% and get more dollars available for a borrower than I could with a 100% loan plus LMI.
The premium for LMI rises quite steeply depending on the LVR. The cost in dollars for a loan for 91.9% can be substantially different than a loan of 92.1% even though in dollar terms it's not much different.
If I get asked to write a 95% loan I never arrange a 95% loan and then ask the borrower to pay the LMI because the insurance premium on a 95% loan is so much higher than a 91.5% loan plus LMI. Does that make sense. Sometimes I have to play around for a while to get the cheapest option. I'm not worried about a few dollars, but it can make a difference of several thousand dollars for 10 minutes of input.
Take risks - if you win you will become wealthy, if you lose you will become wise
If I get asked to write a 95% loan I never arrange a 95% loan and then ask the borrower to pay the LMI because the insurance premium on a 95% loan is so much higher than a 91.5% loan plus LMI. Does that make sense. Sometimes I have to play around for a while to get the cheapest option. I'm not worried about a few dollars, but it can make a difference of several thousand dollars for 10 minutes of input.
Yes I think I understand what you're saying.
It raises a question, do you think some people still do end up borrowing 95% and then pay the LMI themselves?
It raises a question, do you think some people still do end up borrowing 95% and then pay the LMI themselves?
I really don't know, my clients don't. I guess it's fair to assume that somewhere an inexperienced broker or banker will do that, but all involved in lending must do continual training (CPD points) and all come into contact with BDM's who try to upskill brokers and mobile lenders as much as possible.
I would hope that it's rare, but I can't give you a written guarantee.
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