Question 1

Do I have to pay Loan Mortgage Insurance?

Accepted Answer

As a general guideline Loan Mortgage Insurance is payable on all fully verified loans with an LVR over 80%. Lo Doc loans normally attract Loan mortgage insurance when the LVR exceeds 60%.

Question 2

What is an LVR?

Accepted Answer

LVR stands for Loan to Value ratio. For example, if a home is purchased for $500,000 and the loan required is $250,000 then the LVR is 50%. If the loan is for $300,000 the LVR is 60%. (Divide the loan amount by the purchase amount).

Question 3

Why does JDL Strategies encourage firewalls as part of its finance strategies?

Accepted Answer

1. When you create a firewall between lenders you have more control on what to do if your situation is critical and you need to sell properties. For instance; in the case where funder  A holds the mortgage over the investment property and also the owner occupied property and one of the properties needs to be sold the bank will always try to enforce the sale of the investment property first.  They will then take all the funds to repay the debt they hold from the sale of this property. All funds are used and the clients need to repay the remaining debt from their own sources. In the instance where they can not repay the loan then the bank will foreclose on the owner occupied property as well. When a firewall is in place the client can sell the investment property or the bank can sell the investment property.  In this instance the bank that holds the first mortgage on the investment property will only require for their debt to be repaid. We then recommend that any excess funds from the sale of the property be used to assist in the repayment of the mortgage against the owner occupied property until any insurance help out or until the client has got themselves into the position to help themselves.  2. Another reason for a firewall is that when a client needs to go into mortgage insurance it is calculated on a sliding scale.  For instance, if a client needs to go to 90% on both the refinance and the purchase and use the same funder it can cost a lot more than if we use two separate funds e.g. Two properties both worth $500,000 (total of securities is $1,000,000).  The client wishes to borrow 90% against both properties as they already have an existing loan of $400,000 against the owner occupied property. In this case the client will not pay mortgage insurance just against the increase and the purchase but the full $900,000 loan.  Mortgage insurance with Genworth for instance would be $17,730 but if this was split in to two separate funds and then given to Genworth again, the mortgage insurance on a $450,000 loan is $6,975, twice this is $13,950. A saving of $3,780.00. This amount over a 30 year term on an interest rate of 7% would incur $5,273.44 interest or total cost of $9,053.44 extra.  3. The other consideration is that as mortgage insurance is calculated on the whole loan it then needs to be proportioned to what is the personal portion and what is the investment portion.  This is why we are always trying to do the minimum lend against the property that holds the owner occupied debt and the most against the investment property.

Question 4

How can we trust your property recommendations? (Our Due Diligence when sourcing properties)

Accepted Answer

We are confident in our recommendations and research due to the quality and quantity of prior research we do on our clients’ behalf. Before any property is presented to our clients, a great deal of research and investigation by the JDL Property Division is done into the builders that we recommend and also on the location that these builders are constructing properties in. We don’t deal with just any builder that knocks on our door, nor do we present our clients with locations that do not meet our strict requirements.  By doing this for our clients we take the hard work out of the equation when looking for a good sound investment. But of course, we also encourage all our clients to do their own research and come back to us with any questions. We don’t expect you to just take our word on a matter!

Question 5

Why should I use a Property Manager?

Accepted Answer

When it comes to buying an investment property should you use a property management company?  Let’s get real about this – The thought of losing a percentage of your weekly rental income to a property management company may strike you as rather excessive, but sometimes that cut can pay dividends in the short and long term.  One very good reason to use a property manager is because they are the perfect buffer between you and your tenant — and if relations were to deteriorate you might be very grateful that you are not the front man.

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