 Home loan specialist Vicky Edema
Answer your home loan questions...
Our Managing Director, Vicky Edema, is a past State and National President of the MFAA (formerly MIAA). Vicky’s experience in the mortgage industry is second to none. This month Vicky answers questions on the following topics:
1. Undervalued
2. Aussie expat investing
3. 100% investment loan
4. Lenders mortgage insurance rebate
This month's Your Mortgage Magazine "Ask Vicky"
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| Undervalued |
 I recently refinanced and received a property valuation that was well below a previous valuation I had nine months earlier, This meant that mortgage insurance was payable. When I asked the lender if I could have a second opinion they said no. Was I entitled to a second opinion?
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 Each lender contracts the valuations of its borrowing clients out to a panel of valuers. As a borrower, you may only use a valuer if it is accredited with your lender. However, even if your lender has several valuers on its panel, you may not be entitled to choose between them, or have a 'second opinion' carried out. Patrick Brady of WBP Valuers says that most lenders allocate valuation jobs to valuers on a postcode basis - with each valuer taking responsibility for a unique set of postcodes.
Check with your lender to see if there is more than one valuer allocated to your postcode, in which case you can request a second opinion - although you'll probably have to foot the bill for it. Brady advises that, given current market conditions, the value of the property may well have decreased. If this is the case, you might instead ask yourself whether it was the right time to refinance.
Perhaps in future it would be a wise idea to get a valuation done before you progress your refinance too far or outlay any other costs. That way, you can have a second opinion and some guide to the value of your property before you start the process. At the end of the day, however, your incoming lender has the right to accept his panel valuers figure as the one it will rely on.
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| Aussie expat investing |
I'm an Aussie currently living in Hong Kong. I'm looking to purchase my first investment property and have been looking on the Gold Coast at apartments for under $300,000. The agent came across one that was 45m2, after which a rule about 50% equity was brought to my attention. Can you please explain what this is?
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lf you have come across policy guidelines regarding restrictions on the amount of equity you are required to contribute to an investment, this most likely stems from lenders mortgage insurers, who will not cover or will limit the amount they will insure for a lender, on certain postcodes or dwelling types.
The fact that you are currently residing overseas would generally not make any difference to the size of deposit needed to secure residential real estate, As an Australian citizen, the Foreign Investment Review Board exempts you from usual notification process required by residents of foreign countries wishing to purchase property.
LMI providers place restrictions on dwelling size in square metres, and generally will not cover a lender where the mortgage is secured over a unit that is less than 50m2 in size, This said, there are a number of lenders who will provide uo to 80% of the purchase price without any requirement for LMI. They are happy to lend to Australian citizens who live and work overseas. You will still need to meet servicing capacity tests and, depending on the size of the property and postcode, the lender may take a lower percentage of the rent when calculating ability to repay. Check out some mortgage brokers who have plenty of lenders on their panel, and ask them to source a lender who will write a loan on a Gold Coast apartment under 45m2 to 80% of the purchase price/valuation, whichever is the lesser.
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| 100% investment loan? |
I am thinking of buying my first property as an investment. I don't have any cash deposit - am I still eligible for an investor loan? I would be looking to rent out the property for one year and then possibly move in myself.
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In the past, requirements for taking out investor loans used to be quite different from those required for an owner-occupied mortgage. In particular, investor loans were seen as riskier, so lenders would usually seek a higher interest rate and demand a larger deposit.
These days, there is growing recognition that risks surrounding investment properties are generally on par with those of owner-occupied properties, so interest rates are roughly equivalent, but certain restrictions still apply to investors. Whereas owner-occupiers can now borrow up to 100% of the property plus extra funds that can be used to cover transaction costs including stamp duty, investors are still restricted by a 90% loan to value ratio. This means that you will almost certainly require a 10% deposit, in the form of cash or equity.
Given the current tightness in the rental market and the slowing property prices in many areas, some economists are suggesting it might be a good time to make the grand leap into property investing. It's advisable to make sure you do conduct thorough due diligence and factor in all the costs when working out how much you can afford to borrow.
Another option could be to go in as an owner-occupier from the outset (thus making yourself eligible for a government grant) and renting the property out after one year. The recent move by the Rudd government to triple the First Home Owner Grant to $21,000 for buying new homes and doubling it to $14,000 for those who are buying an established dwelling will significantly ease these financial constraints.
It is likely to take you much longer than a year to save $14,000 or $21,000 of after-tax dollars.
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| Lenders mortgage insurance rebate |
My partner and I bought a house in Derby, Western Australia in December 2007 for $232 000. We paid the minimum 5% deposit and had to pay mortgage insurance. A friend of mine has told me there is a way to claim back your mortgage insurance if your house goes up in value by the other 15%. I'm sure our house would have gone up more than this because of the recent property boom in WA. I'm just wondering if this is true and if so how to go about claiming it back.
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Generally speaking, regardless of whether you have seen an increase in your property's value or not, lenders mortgage insurance (LMI) is not tied to how your property fares in terms of its capital value once you've purchased it.
Essentially, this means that if you originally paid a 5% deposit and your house has increased in value by 15% since purchase, this will not equate to a rebate on your LMI. Some circumstances allow borrowers to recapture some of their LMI expenditure if they refinance within a certain timeframe of taking out the loan, Most LMI providers offer a partial refund if a customer refinances the loan or the loan is paid out early, typically before 18 months to two years, depending on the insurer.
However, the onus is on you, the borrower, to find out if you're eligible. If you are paying out your existing loan early, for example because you are moving to another lender, and you are within the initial 18-month to two-year period of the loan, you may be eligible for a partial refund and should speak with your previous lender who should be able to apply for the refund on your behalf.
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