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Tiny LMI bill for a first home buyer borrowing 95%

How a unique policy really worked for a first home buyer

Tiny LMI bill for a first home buyer borrowing 95%

This is a brilliant example of how amazing our job is!

Lets call our lovely client Amelia, names changed to protect the innocent of course. She’s a fabulous lawyer on a great salary but with rent and life saving a deposit has been difficult particularly in a rapidly rising property market – we always say you can’t outsave Sydney when it is on the move. This is so easily true of many professionals paying their Hecs debt off, or setting themselves up with a household and vehicles, or even those returning from overeseas.

Amelia, like so many of us, can make repayments easily, in fact she was only borrowing around half of what the banks felt comfortable lending her. Because of her income she also didn’t qualify for some of the current first home buyers incentives which would have wiped her lenders mortgage insurance (LMI).

Right about the time she was enquiring Gateway brought out a new feature on their loans called “pay by the month lenders mortgage insurance”, currently it’s a unique offering (although it is available to other lenders, just not offered). This was the proverbial perfect script and Amelia bought the most beautiful sky scape (with a house attached, but that view!!) using this loan with a 5% deposit and change to cover her costs.

The LMI payment was chunky, around $458 a month added to her repayment, but here’s where it becomes really magic.

The mortgage insurance is “turned off” once her loan is 80% of the property value, which in Amelia’s instance was 7 short months later!!!

So the actual LMI she paid was $3206 in total, but had she paid it in full up front it would have been 23,175.00 – that is nearly $20,000 saved thanks to diligent and deliberate over-repayments and the market doing it’s thing. Amelia responded to our check in to ask if we could look at removing the LMI, a valuation was done and it was lifted. I’m not quite sure who was happier with this outcome – us or Amelia.

Now its worth noting two things:
• Gateway actually have triggers in their system to check in on settled loans to see where they are at and if the LMI can be cancelled (we do too but how good is it when the lender does)
• And conversely, if the market slows or worse – tanks – she could have ended up paying more LMI than original plans, I guess the point to note there is being cautious about the market conditions and polishing up your crystal ball when you can….

So the moral to the story, a little thinking outside the box, a solid effort and good cashflow & this could be you. And the part we played, well without a broker you’d have a hard time tripping over Gateway as a lender without a branch channel, and you wouldn’t necessarily know if you can qualify for this either so get in touch!!

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