Browse Forums Home Finance 1 Aug 14, 2009 2:19 pm Perhaps somebody in the mortgage industry can help? This is proving to be a difficult one. We are having problems with LMI from a certain major bank. Our situation is probably a little different from the norm. (I've rounded all the figures up/down to nice numbers to make it easier). We got our land loan 6 months ago: $350,000 land value $332,500 loan $17,500 deposit. . . thus 95% LVR. We paid LMI on 95% LVR. ($7600ish) Construction loan . . . this is where it gets difficult. . . we've saved up some extra money and are paying 10% deposit. . . not only for the construction component of the loan, we are also topping up the land loan to a deposit of 10%. Construction loan: $400,000 construction value $342,500 loan $57,500 deposit. . . thus 85.65% LVR (if we were looking at it as a separate loan). Total loan (land and construction): $750,000 total value $675,000 loan $75,000 deposit. . . thus 90% LVR. This is where the bank comes in. . . We have to pay LMI on the second half of the loan, how do we work it out? 1) Calculate LMI on $675,500 loan at 90% LVR and subtract the LMI we've already paid LMI to pay = approx $4,300 2) Calculate LMI on $342,500 construction component of loan at 85.65 LVR (using table for loans over $500K) LMI to pay = approx $4,300 But no. . . bank is insisting that the correct way is such: 3) Total loan = $675,000. They pay off our existing loan ($339,568 (we capitalized the LMI)), then charge us LMI on the remaining amount ($335,432) at 90% LVR(using table for loans over $500K) LMI to pay = approx $6,000 This may work for people that paid 10% deposit on the land and 10% on construction, but they are totally forgetting that we paid 5% on the land and are now effectively paying 14.35% on the construction. Somebody please help! Re: LMI calculation problem. . . mortgage advisors please help! 2Aug 14, 2009 4:50 pm It's impossible to do this calculation for you as how the loan is set up is unknown. However, you cannot deduct the LMI already paid as you have already (possibly) borrowed that amount as well. Also LMI premiums are not fixed amounts, they are dependent on the loan amount bracket as well as the ratio. Average consumer wouldn't have access to these premium rates. Re: LMI calculation problem. . . mortgage advisors please help! 3Aug 14, 2009 5:54 pm I think that's a big problem thlo. . . LMI rates aren't available to the average Jo-Blow. . . How are we supposed to shop around to get the best deal in a mortgage when the LMI fee attached is a lucky-dip? We're supposed to just accept the amount we have to pay and live with it. We're unable to check the amount that they're charging is correct, and we're unable to make the decision on how much deposit to put down in terms of how much LMI we're going to pay (and probably not too many people know that LMI rates go up in "bands"). An example. . . with one lender, if you're borrowing between $500K and $1M, the LMI rates are approx 1.6% for above 88% to 90%, and jump up to approx 2.57% for above 90% to 92%. So if, for instance you are borrowing for a $600K property, if you managed to scrape together the 10% deposit, you'd pay approx $9,400 LMI, but if you were putting up 9% you'd be up for $15,295. . . if you can only manage a 5% deposit you'll be up for 2.91%, meaning an $18,079 LMI premium. . . so basically, if you go from 5% to 10% deposit on a home loan of this amount, you can save yourself almost $9,000. If homebuyers were furnished with this info before going for a loan, they might think twice and save a bit more of a deposit before taking the plunge, but the information just isn't readily available. Turns out that a little bit of google searching enabled me to find my bank's rate sheet so I was able to work out the fees for myself, and this prompted us to go for paying the full 10% on the overall loan at construction stage, to try and save ourselve $10K. My major problem here is that my mortgage broker told me to expect to pay the LMI premium based on my example 1. (see below). Her advisor at Mortgage Broker headquarters assured her that she was advising me correctly, yet it turns out that the LMI provider's guidelines say the LMI should be calculated as per my example 3. So that's the end of it, we have to pay an extra $1,700. I just think it's grossly unfair, and I'm plotting revenge. . . MwaHaHargh. Thinking about taking them to fair trading . . . but really, it's just the same as with most situations right now. . . it's the big boys that win and unless you're willing to waste untold money and time in taking them to court, they just get away with it. 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