Be­ware the dreaded mort­gage insurance

Keith is keen to buy now but ...

Money Magazine Australia - - ASK PAUL -

QI

am 30 years old and cur­rently have close to $50,000 saved. I am ex­pect­ing an­other $50,000, hope­fully be­fore the end of the year. Would you sug­gest I get a mort­gage now with the first $50,000 and then get an­other mort­gage with the sec­ond $50,000, or wait un­til I have the full $100,000 and get a more valu­able prop­erty? Maybe even one with the chance to de­velop, as I am in the con­struc­tion in­dus­try.

Good job sav­ing $50,000, Keith, and the ad­di­tional $50,000 will cer­tainly help. Pro­vid­ing you are sure it will ar­rive in your bank ac­count ei­ther this year or early next year, I don’t think it will make much dif­fer- ence in terms of the value of any prop­erty you might buy. It is al­ready Septem­ber and if you bought and found a prop­erty im­me­di­ately, it is un­likely you would set­tle be­fore late Oc­to­ber or Novem­ber.

Where that ex­tra $50,000 would be re­ally handy is in cre­at­ing a de­posit of over 20% to avoid the dreaded lenders mort­gage insurance (LMI). I say dreaded be­cause you pay for this to pro­tect the lender, not you.

So pro­vided you are cer­tain that you will re­ceive the ex­tra $50,000, I would plan to buy a prop­erty on the ba­sis that you have it al­ready. Do dis­cuss this with your lender, though. It would be silly to pro­ceed in haste and find you get hit with mort­gage insurance.

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