Mortage with gaurantor & assets

kev98 on 11/01/2015 - 20:32
Last edited 11/01/2015 - 20:33

Quick question regarding getting a mortgage for purpose of investment property. I currently do not own a home but am trying to sus out process for first home. If I don't have 20% of loan value, do I pay LMI under every circumstance?

Situation is I have 20% in assets (fhsa, shares, cash, car) + my mum would go guarantor with her house (value around 1 million - paid off) Would my mum going guarantor mean I am borrowing against the equity in her house, thus no LMI? Or do I need to sell assets off to have cash for my deposit to avoid lmi.

Thanks in advanced

EDIT: I haven't checked with brokers yet thought I might get some information beforehand

Financial

Comments

  • sa-ozzie on 11/01/2015 - 20:34
    +1

    Going guarantor is never a good idea..get your mum to get a reverse mortgage

    • kev98 on 11/01/2015 - 20:53

      May I ask why? In my situation I have plenty of assets to be able to afford repayments + have 1 full time job + one casual which I can easily get extra hours at. Living at home as well so my expenses aren't very high (petrol & car insurance, prepaid mobile are only real expenses)

    • justjules on 12/01/2015 - 22:48
      -2

      Sometimes I see some things here that are just so ridiculous I have to log in. Blimey, this has to be the worst advice I have ever seen here.

      Having your parents as guarantors is good strategy for first home buyers. The guarantee will be limited the equity required to bring the LVR down to 80% and your mum is only exposed to the size of the guarantee in the event you default and your house is sold for less than the value of the mortgage.

      Obviously, there is some risk for your mum in this situation but it is mitigated by (a) the fact she would be backing you to do the right thing, working your arse off to pay the debt down and (b) the home having equity that can cover her guarantee. If (a) and (b) then fail, her exposure is completely limited to the size of the guarantee which, in her circumstances of a fully unencumbered home, will not put her retirement at risk. Put in this context, the risk is minimal for saving of $10-15k worth of insurance.

      As for a reverse mortgage….. I am not even going to waste my time, it's awful advice. Full stop

      • sa-ozzie on 12/01/2015 - 23:36

        Jules ask any money expert whether anyone should go guarantor and the answer will be no. So many people have been burnt doing this. Guarantor is the one taking all of the risk.
        Kev a better idea would be to get an interest free loan from your mum to get up to 20% deposit using your shares as collateral with your mum.

  • boonanza on 11/01/2015 - 21:00
    +2

    If you can afford the repayments but don't have enough of a deposit why don't you wait until you do especially if it's for an investment property.

    • kev98 on 11/01/2015 - 21:03

      It's more an issue of not wanting to sell off some shares I own, but if this isn't possible I will just have to sell them.

  • sweefu on 11/01/2015 - 21:18

    Go and talk to a decent mortgage broker. In a situation like this they add real value, and it costs you nothing.

  • tomleonhart on 11/01/2015 - 21:51
    +2

    Broker here. Even with your mum being the guarantor, many banks still prefer you to chip in some of your equity even if you have a guarantor.

    Would my mum going guarantor mean I am borrowing against the equity in her house, thus no LMI? - Yes.

    PM me if you have any more question.

    EDIT: Also when you say you have 20% in assets, have you factored in Stamp Duty, Legal fee and reports fee etc… ?

    • Baysew on 12/01/2015 - 09:10

      PM me if you have any more question.

      Post your questions here, not as PM. It's an interesting topic, that should be shared.

      • snappy1234 on 12/01/2015 - 10:24

        Yes agree Baysew (unless it was something confidential)which this isn't. :)

    • kev98 on 13/01/2015 - 12:02

      Thanks mate, I will speak with financial advisor and see what he says, from there speak with a broker.

      I don't really have any other specific questions but I guess one would be what kind of lenders are ok with these types of loans generally? Eg cba, Westpac or smaller banks. I see heritage currently has lowest rates. Cheers

      • tomleonhart on 13/01/2015 - 13:38

        CBA tends to be the best with these type of loans as they don't ask much questions in comparison to other banks.

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