Читать книгу The Female Investor - Kate Hill - Страница 40

It's about this time in a new, or returned, property buyer's journey that they start to come across a whole bunch of terms and acronyms that it will pay for them to understand. And, when it comes to finance, the two big ones to do with your mortgage are LVR and LMI.

LVR is short for loan‐to‐valuation ratio — the ratio of your property loan compared to the value of the property you want to buy. So, if you purchase a property for $500 000 and you have a deposit of $100 000 — 20 per cent of the purchase price — then you have an LVR of 80/20.

Most first‐time buyers don't have a 20 per cent deposit, because it is difficult to save such a high figure while also paying rent and normal household expenses. However, just because you have less than this figure as a deposit doesn't mean you won't qualify for a property loan, although it might mean you need to change where and what you are looking at buying (more about that in later chapters). Your broker will be able to provide advice on the lenders best suited to borrowers with higher LVRs of, say, 90/10 — 90 per cent (loan) versus 10 per cent (deposit).

In Australia, the catch is that you will need to pay something called lenders mortgage insurance (LMI) — yep, another new acronym to learn. LMI is a fee that is charged to borrowers with a deposit smaller than 20 per cent of the purchase price of the property.

Now, it might sound like it's an insurance policy for you, but it's not. It's insurance for the lender via an additional fee from the buyer because of the perceived higher risk in lending money to a borrower with a smaller deposit.

Here's the truth about LMI: no one likes paying it, but if it makes the difference between you getting into the market sooner — or even at all — then it can be used to your advantage. That's because paying LMI, which can also be capitalised (added) onto the loan, is often a small price to pay compared to the potential capital growth the property could earn you over the additional years you will own it. For property investors, having larger property loans can also provide tax advantages, given it is only the interest component of a mortgage that is tax deductible — you should discuss this with your accountant.