Browse Forums Home Finance 1 Apr 25, 2010 2:03 pm Hi We got charged a hefty MI premium for our investment block we recently purchased - settlement has now gone through. But is there any way of me getting trying to get a better quote and refinance it ?? A long shot I know but thought I would ask the question..... Re: Mortgage Insurance query 3Apr 25, 2010 3:04 pm Hi ELH05, A better quote for MI? I don't think you can choose where the MI is purchased from as it is there to protect the bank and not you, so I suppose bank has the say in the insurance company, you however foot the bill. Refinance? You mean you want to refinance purely because MI premium is high? I think you should consider the MI premium as lost money, you will never get it back. Sorry if I have not really answered anything, I've confused myself jim Re: Mortgage Insurance query 4Apr 25, 2010 3:38 pm Thanks for your replies - as I said a long shot question..... Am I being unreasonable with what I expected the premium to be ? Block was $109,000 for investment purposes We didnt put in any money - bank financed 100% Our own properties that we were using as equity - well their values didnt come in near to what we expected, hence why we were charged MI. Cost of MI = $13000 Just thought it was really high, but we had a crappy mortgage broker and to cut a long story short we didnt have enough time to question it. Re: Mortgage Insurance query 6Apr 25, 2010 8:56 pm Does your MI premium include the projected money that your bank will be lending to pay for the build? I know that we paid our total MI premium when we settled on the land for both the land and build, the total premium was about $12,000 we got some dispensation as we were doing a loan substitution so we were able to "credit" the MI premium we paid with our last purchase. I don't know too much about MI, but I know that there is not much competition in the industry and so MI companies can pretty much charge whatever they want. As someone else has already said, it is pretty much dead money that you pay simply so the bank has some assurance that the bank will get their money in the event that you default and you can get something that you want without having a deposit. I know that MI is for those of us who do not have the full deposit, but maybe no deposit at all made the MI company/bank nervous. Even with the inceasing cost of land in recent years, maybe they are looking at it that it would be harder to get money back on a vacant piece of land opposed to an established home. We have made two purchases now and used MI both time and have learnt there is no reasoning to how they (MI) decide what they are going to do, what they want from you and how much they are going to charge you. Painting finished, time to tile! HANDOVER - THURSDAY 3RD MARCH 2011 Re: Mortgage Insurance query 7Apr 26, 2010 11:26 pm The mortgage insurers charge the lender different amounts depending on the lender. As soon as you know the value and your loan amount (and he lender), you should know how much mortgage insurance is. It isn't decided depending on how they feel for each deal. $13k is excessive however it may be covering the construction, unsure. $13k in MI would cover about $400k (at 95%) using one of our lenders who normally charge the most. The good thing in your case is that it is investment and hence it is probably tax deductable? You can get a rebate back from the lender if you refinance out in a certain amount of time (normally 2 years) but you wouldn't get enough back to warrant refinancing. Get your broker to do the figures and see how they stack up. If you have any doubts over him, go to another broker and ask him to do the figures. Glen Re: Mortgage Insurance query 8Apr 27, 2010 10:27 am Hi ELH05, The MI premium is calculated on your total loan valuation ratio (LVR). You mentioned you used other properties to help purchase the land. Clearly you have other loans secured by those other properties and by using those other properties the loans and the properties are probably now cross secured (all loans secured by all properties). In that case the lender and their mortgage insurer are assessing the total risk. Therefore if you owned real estate worth say $1,500K and owed a total of $1,225K the LVR is 82% and the LMI premium is approx 0.90% of your total loans. Why all your loans? That because if a borrower defaults they typically don’t default on just one loan they default on everything. So the risk is spread across all the loans and all the properties. Is refinancing an option? Probably not. Unless your properties value higher and enable you to avoid the LMI premium with new lender. In that case you will have still paid the premium to 1st lender and while you can seek a refund if you repay the loan early it’s typically not much. Plus you would incur an application fee to new lender, government fees to release and register mortgages etc. Hard to see how you would be better off. Suggestions? With benefit of hindsight try to get your finance organised before signing the purchase contract so that you understand the likely costs. If that's not possible, seek a longer finance clause. That might give you enought time to try another lender if the valuations from 1st lender are not satisfactory. Note that changing lenders can open a pandora's box of costs (break costs on fixed rate loans, gov charges, deferred establishment fees etc). I’ve sometimes structured loans for clients in circumstances like yours where we only used one other property to help secure the loan. That meant the LVR was higher than it might have been had we cross secured using all properties but because the total of the loans caught up in the transaction were lower the premium ended up being lower. For example if the premium was say 2% of $400K that’s a better option that paying 1% of $1,000K. Regards, BtB 2 7191 There is no reason why building contract reconciliation cannot be done prior to handover, if the builder won't do it get someone to do it for you. Why would you pay for… 3 6687 Hi there, long-time lurker but first time posting. I've bought a house 2 and a bit years ago and last year we had some major water damage on a converted pergola area… 0 7931 |