20% or 15% Deposit for Home Loan

Lakstatic on 10/09/2021 - 22:43
Last edited 11/09/2021 - 18:23

Hi people,

I am getting 85% LVR and $1 LMI offer for my home loan, meaning I will not pay any LMI even though my home LVR is less than 80%. I am a first home buyer and planning to purchase another investment property soon.

My question is - Would you
1) pay 15% deposit and keep extra 5% cash at hand for next investment property purchase and pay more monthly repayments or
2) pay 20% deposit to keep your repayments low for next investment property serviceability?

My investment property purchase would be P&I loan as well.

Thanks in advance.

Financial Home Loan Loan

Comments

  • jug123 on 10/09/2021 - 23:29
    +2

    pay more off the PPOR and borrow using the equity for investment as this will provide increased negative gearing returns assuming ur taxable income is reasonable

    • akstatic on 10/09/2021 - 23:53

      Thanks for the suggestion

  • Mechz on 10/09/2021 - 23:37
    +1

    Borrow more but have an offset, put spare deposit money into the offset.

    • akstatic on 10/09/2021 - 23:54

      Thanks.

  • ronafios on 11/09/2021 - 05:14
    +1

    Assuming your interest rate is around 2%, you are likely better off reserving the extra money for other investments or to pay off more expensive debt.

    • akstatic on 11/09/2021 - 07:52
      +1

      That is my thought as well, but donā€™t have other debts. Rates are definitely 1.99%. I was thinking whether increased repayments on PPoR would decrease my repayments on investments. I think I will hold on to that extra 5%

      • o-oiii on 11/09/2021 - 23:13

        How did you get 1.99%? Does the banker offer you a better deal? I can only find 2.09% (1 year fixed rate) or 1.89% (2 year fixed rate) for owner occupier with less than 20% deposit.

        • akstatic on 12/09/2021 - 09:11

          I will check with the broker why am I not getting 1.89? šŸ˜€

  • Tee Rex Arms on 11/09/2021 - 06:47

    Inheritance coin?

    • akstatic on 11/09/2021 - 07:53

      What does that mean?

  • SmiTTy on 11/09/2021 - 08:21

    1.
    Definitely.

    Borrow that extra 5% as a separate account with a redraw (and/or offset) . Pay it out then you can redraw it for whatever you want. Rate will probably be the cheapest (because it's a ppor loan not an IP loan)

    • akstatic on 11/09/2021 - 08:38

      Cheers mate

  • Bonbi on 11/09/2021 - 09:46

    What lender?

  • Gunther on 11/09/2021 - 10:01

    If LMI is basically free…..Maximize Loan Size whilst you Maximize Cash in the Offset. Win-Win for you!

    • akstatic on 11/09/2021 - 18:23

      Thanks.

  • yellowfever on 11/09/2021 - 18:14
    +1

    I think your first sentence is meant to say 15% deposit?

  • MarsTitan on 11/09/2021 - 19:02
    +1

    Just so you understand, in the worst case scenario the lmi provider can come after you for any losses. The chances are extremely small but there is still a risk (0.1%). Bank is basically covering their ass with that $1.

    https://www.abc.net.au/news/2021-09-10/lenders-mortgage-insuā€¦

    In any case, I would still go for 85% borrowing. Some providers have up to 90%lvr without lmi for certain professions. Best to get in touch with a broker.

    • akstatic on 11/09/2021 - 19:36

      Good to know

    • avoidfullprice on 12/09/2021 - 13:26

      in the worst case scenario the lmi provider can come after you for any losses.

      LMI provider more or less covers the lender of the 20% deposit shortfall. If the borrower defaults or sells the property, and the property drops below 20% of the original purchase price, then the lender (not the LMI provider) can come after the borrower

      • MarsTitan on 12/09/2021 - 19:26

        Not an expert on this. Just relaying what is in the article.

        https://www.abc.net.au/news/2021-09-09/lenders-mortgage-insuā€¦

        Debt trap for those who default

        The insurance is only paid out to the lender in the event that a mortgage defaults and its sale price does notĀ cover what the bank is owed.

        In that instance, the insurer pays out the lender's missing money.

        The catch for home owners is that the insurer can then come after the person who had defaulted on the mortgage to recoup theĀ money it has paid out to the bank.

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