Beware the dreaded mortgage insurance
Keith is keen to buy now but ...
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.