Property Valuation for Refinance - Get below 80% LVR

Axytrix on 03/10/2019 - 16:54

A bit of context:
3 years ago I purchased a house for 725K with 12% (88% LVR) and paid LMI. I’ve since paid 16K throughout the course of this loan. A portion of my loan was fixed at 4% and is due to expire in Jan 2020. I am hoping to refinance for a Variable loan with a smaller lender like UBank/Anthena and I wish not to pay LMI again.

Unfortunately that 16K doesn’t put me below 80% LVR of the purchase value. In conjunction with this however, a few houses in the area have sold for below 725k recently.

From my research throughout these forums and Whirlpool, the answer seems to be to get a Mortgage broker who will scour the banks for a Valuation which meets my needs. I know however that Mortgage brokers won’t approach these smaller lenders. Can I start the application process with multiple banks at the same time? Do I start the process now with Jan 2020 approaching?

Any advice would be appreciated.

Financial

Comments

  • garetz on 03/10/2019 - 16:58

    If you apply for multiple banks that is a red flag, and will likely reduce your credit rating greatly.

    • Axytrix on 03/10/2019 - 17:05

      Cheers! So I'll do them one by one. Typically how long would you say a bank/lender would take for a curb-side/formal valuation? Couple of weeks from application?

      • salmon123 on 03/10/2019 - 17:13
        +1

        So I'll do them one by one. Typically how long would you say a bank/lender would take for a curb-side/formal valuation? Couple of weeks from application?

        I'm not sure one by one vs all at the same time will make much difference in your situation.

        Typically how long would you say a bank/lender would take for a curb-side/formal valuation?

        Just ask the lender straight out if they can do a desktop valuation on your property for free, before you apply. Some will say no, other will say only after application, others will defer to an external valuer … but you only need 1 to say, yes, right?

  • salmon123 on 03/10/2019 - 17:07

    A portion of my loan was fixed at 4% and is due to expire in Jan 2020. I am hoping to refinance for a Variable loan with a smaller lender like UBank/Anthena and I wish not to pay LMI again.

    Does it revert to a variable rate? It's probably lower than 4% now, with the interest rate cuts.

    I'd just sit back and wait 12-18 months. Prices will probably go up and you can refinance with 80% LVR …

    • Axytrix on 03/10/2019 - 17:15

      Thanks salmon! Yes it will revert to a variable rate (likely around 0.5% better off). However, I believe a LVR below 80% enables me to have a better rate (sometime another 0.5%), do I just say to my bank "I'm gonna leave as another bank has valued me below 80% and offering me X percent"?

      • salmon123 on 03/10/2019 - 17:19

        do I just say to my bank "I'm gonna leave as another bank has valued me below 80% and offering me X percent"?

        You can try, but bank employees aren't complete idiots when it comes to this stuff.

        I'd probably try appealing for goodwill, rather than a bald threat to switch.

        • Enzalicious on 03/10/2019 - 21:23

          I tried good will. Didn’t help, it was only when I threatened to leave that they actually did something.

          Even then the best rate they gave me was 3.38 for my home and my investment is 3.78. Both are P&I

          50% LVR against both properties.

  • Mikay89 on 03/10/2019 - 17:12

    I struggled through a similar situation, purchased my property in early 2016 which has now dropped almost 20% in value pushing me into negative Equity. Contacted a broker to explore my options regarding re-financing, effectively this was not possible strictly due to not achieving 80% LVR - without this it's extremely difficult even to commence the application process as the banks will likely knock you back.
    Instead I rang my bank (CBA) and hassled them for a while, took about 5 attempts speaking to various lending staff and a manager before they agreed to offer me a 0.3% rate cut on my variable loan to be a little more competitive. Tis the market at the moment!

    • dcep on 03/10/2019 - 17:31

      Perth, i see.

    • CyberMurning on 03/10/2019 - 18:11

      "purchased my property in early 2016 which has now dropped almost 20% in value pushing me into negative Equity."

      hmm as long you dont do refinancing, then bank will not send you letter to say "hey your prop now worth xxx and you need to send money to keep the LVR at 80%"
      or they will/are????

      • Mikay89 on 04/10/2019 - 10:46

        Yes Perth, isn't pretty out here if you have bought in the last 5 years or so, even uglier for those in the 5-10year old range depending on locality, not to mention the regional areas.
        No ChiMot the bank hasn't done that thankfully! It's always a risk trying to negotiate your rate in said position!
        I actually like CBA's platform and services compared to others, was just a matter of bringing my rate down to a more acceptable level.
        E.g. it was sitting at 4.24% about 6 months ago (before the RBA cuts) when new offers were in the 3.7-3.9% range, it's now down to a more palatable 3.57% (new cut hasn't taken effect yet).
        Still not competitive when comparing vs the likes of Ubank/Athena offers etc. but I'm much happier that they did something for me.
        Plenty of friends are in similar territory here, but with rates still in the 4.xx% range and their banks won't budge!

  • brendanm on 03/10/2019 - 17:58
    +3

    You've only paid $16k in 3 years?

    • CyberMurning on 03/10/2019 - 18:08

      thats for (just) the LMI part i think.

  • p1 ama on 03/10/2019 - 18:02

    I used to work in credit risk assessment many years ago - you can get a more favourable valuation if you're lucky, sure, but you cannot fundamentally change how much your property is worth.

    Property prices have hardly gone up in the last 3 years, if anything, they might have even gone down. As your research has shown, it's likely that your LVR is above 80%, you can't hack your way around that. You'll need to pay LMI, or you could try your luck with a bigger bank as they tend to be a bit more lax with lending criteria (but they usually charge you slightly higher rates, so it might or might not work out in your favour).

    If I was in your shoes, I would be reasonably happy - you bought with a pretty small deposit (only 12%), so having to pay LMI is better than not being able to get a loan at all.

  • mortgagebroker on 03/10/2019 - 18:12

    You answered your own question - go see a mortgage broker.

    Applying for many lenders will not look good on your credit report.
    Apply for one and get it right the first time.

    Start a few weeks prior to the expiry so you can settle once it expires.

    Depending on your lender you may be able to get them to reduce your rate.
    You also have the option to fix again.

  • sweefu on 03/10/2019 - 18:42
    +2

    Broker here.

    I would get a broker to run an RP data report for you.

    It will give you an overview of the comparable sales in the area, and give an indication of what a banks modeled estimate will come in at.

    Do not apply to several banks at once, it will impact your credit score.

    I'm happy to run the report for you, no obligation to use my services.

  • syba on 03/10/2019 - 21:27
    +1

    My suggestion:

    1. Go to a mortgage broker - they have lots of information available to them like RP Data; can find our the best loan for you (they all should cover the major finance companies), etc.

    2. Depending on how much over the 80% LVR you are, see if you can borrow the "over" amount from your family/parents. Even if they can redraw some money against their existing loan. I did that years ago and worked well. Just pay off the minimum to your actual loan and every extra cent into your family loan (write it all up and sign so it is official). You will find you pay off that loan much quicker than a bank loan as you want to actually pay it off quick. Easy to do the calcs of interest, etc and is nice to give them a little extra for helping out once you've paid it back as well.

    FYI, Mortgage Insurance covers the bank if you default - it isn't insurance to cover you (some people seem to think LMI is good as it is insurance for them - go figure!)

    • p1 ama on 03/10/2019 - 21:33

      FYI, Mortgage Insurance covers the bank if you default - it isn't insurance to cover you (some people seem to think LMI is good as it is insurance for them - go figure!)

      You are right that LMI protects the bank, but it also opens up avenues for borrowers who might not have been able to access debt funding. To be honest, LMI is actually good for both. If it weren't for LMI, there would be little chance that borrowers would be able to buy the houses they want with such little equity. It's also good for lenders with lower LVRs as well because it means that their rates won't have to be hiked to cover the risks of borrowers with higher LVR.

  • Kinko82 on 04/10/2019 - 19:32

    Disclosure: I'm a mortgage broker.
    Banks like ubank and Athena are very competitive but are usually not suitable when your loan is 80%+.
    The uncertainty of your valuation and how critical that is to your refinance, you may benefit from a mortgage broker who can actually order a valuation on your property upfront. Some brokers can get this for free with certain banks, whole other Banks will charge the broker $49.
    Once you get valuations that meet your requirement, then you can review which lender would give you the greatest savings compare to your current loan.
    Also be aware that cost of refinance is usually around $350 discharge fee and around $300 government mortgage registration fees. There are also bank fees for your new bank you need to weigh up.
    Alternatively you can try retention or see if there are better products you can switch into at your current bank.

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