Is selling property an option?!

Curiouscat on 30/07/2017 - 16:22

Hello,

Seeking opinons and advice regarding a tricky situation my brother is in.

He and his partner bought a land and started construction everything was okay unless my brother's partner has been detected with kidney failure. She will take some time to get back to work.

With their mortgage the have started to build and are at frame stage, here comes the tricky part. Total loan approved was $400k LMI paid was $8200 which has been capitalized, amount they contributed is $50k and property is valued by bank at $450k . Loan amount disbursed till date is $175k.

One of his mates is willing to buy property at market rate of $510k. In this situation since the full loan amount has not been disbursed how would the Lmi calculation go?

Do they have to foot the whole Lmi amount when payout figure is sought for release of security or will there be any leeway for the same as Lmi was charged for an amount which was never totally disbursed by the bank?!

Thanks in advance.

Financial

Comments

  • MrHyde on 30/07/2017 - 16:33

    Depends on what the terms and conditions of the LMI that you signed.

    Some allow refunds, most don't.

    • Curiouscat on 30/07/2017 - 16:37

      True. If LMI was for the amount disbursed it would have been okay however, here they have not disbursed the whole amount for which they were charging LMI. Which doesn't sound right, charging for some service / finance which was never utilised on the first place.

      • dcep on 30/07/2017 - 19:50
        +1

        Did you get refund for your health or car insurance premium for not claiming any of them?

        • Cheapskate Paul on 30/07/2017 - 23:41
          +1

          That's a very poor analogy. If you take out car insurance, and cancel it after 3 months, you will indeed get a refund. I'm not sure about health insurance as that's the biggest waste of money ever, so I've never had it.

      • tsunamisurfer on 31/07/2017 - 00:11

        LMI is charged on the bank's exposure, and the bank is exposed for $400k even if you haven't drawn it all yet.

  • JIMB0 on 30/07/2017 - 17:35

    I always thought LMI was to cover unfortunate situations like this?

    • airzone on 30/07/2017 - 17:55
      +4

      LMI is to cover the bank if the property value tanks and is worth less than the loan.

      • Euphemistic on 30/07/2017 - 20:40
        +2

        Or you don't repay.

  • capslock on 30/07/2017 - 18:02

    Best to contact your brother's bank. Looks like the main factor is the length of time since the loan was drawn down rather than the amount which has so far been drawn down.

  • kipps on 30/07/2017 - 19:38

    Does any insurance respond to the health problems? Income protection? Insurances held in super?

    Ask bank for mortgage payout figure. That is all you need to discharge mortgage at sale.

    • dcep on 30/07/2017 - 20:02

      That's the problem with super insurance that ppl are not well informed of. All they hear are some "professional" advice from some random internet blokes, is to buy the highest cover within your super insurance for tax benefit rather than shelling out from pocket and be done with it.

      The "standard" inclusion of super insurance are Death Insurance & Total/permanent disability, which don't cover jack shit until you're dead or lost both kidneys needing dialysis for the rest of your life.

      The income protection from super is often an add-on with most only covering 2 years period plus initial waiting period and cut off as soon as you're deem fit.

      • 87percent on 31/07/2017 - 13:57

        Yep this man speaks the truth, which is why I went through my Financial Advisor and he checked all my inclusions and redid them all.

  • tsunamisurfer on 31/07/2017 - 00:13

    OP my guess would be the LMI is payable in full.

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