More lenders have tightened their maximum loan-to-valuation ratios (LVRs) as well as their requirements for genuine savings to be proven over a three month period. Several non-bank lenders are now re-emerging with very competitive deals.

LENDER COMPARISON

The attached table shows some of the more popular variable rate deals with maximum LVRs (for purchases) offered by leading mortgage lenders for loans over $300,000. Twelve month “honeymoon” rate products have been excluded:

		Rate p.a.	LVR max
BankWest	3 yr Rate Tracker	4.92%	90% + LMI
CBA	3 Yr Special Rate Saver	4.96%	90% + LMI
ING	Simplifier Smartpack	5.03%	90% + LMI
Homeside	Homeplus	5.07%	95%
Heritage Build Soc	Basic	5.07%	90%
Homeloans Ltd	Premium Saver	5.09%	90% + LMI
RAMS	Basic	5.09%	95% + LMI
Suncorp Metway	Standard	5.10%	95% + LMI
PLAN Lending	Performance Plus	5.10%	90%
ANZ	Simplicity Plus	5.11%	90%
CBA	Basic Rate Saver	5.13%	90% + LMI
St George	Basic	5.17%	95% + LMI
Aust First Mortgage	Complete Standard	5.19%	90% + LMI
Westpac	Flexi First Option	5.21%	97%

More lenders may soon announce rate cuts following the latest Reserve Bank decision.

RAMS and St George have both discontinued their 100% LVR loans.

• CBA has reduced its maximum LVR to 90%, except for existing customers who have held a CBA loan facility (which may be a credit card) for at least six months;
• 95% is available for these applicants. Australian First Mortgage and Homeloans Ltd have also reduced their maximum LVR to 90%.
• Most lenders now have specific minimum savings requirements of between 3% and 5% of purchase price. There are still a few lenders who are flexible on savings proof.

CAPITALISATION OF LENDER’S MORTGAGE INSURANCE PREMIUM

Lender’s mortgage insurance (LMI) is a once-only insurance premium paid by the borrower to insure the lender against partial loss of loan monies upon termination of the loan. Some lenders allow the mortgage insurance premium to be added to the base loan amount. In the above table, St George and HomeSide both have maximum LVRs of 95%. St George will capitalise its mortgage insurance premium, while HomeSide will not. For a typical 95% $380,000 loan on a $400,000 purchase, borrowers will have to pay in cash the HomeSide LMI premium of approximately $9,000 on top of the 5% deposit. In this example, borrowers could purchase earlier, with less cash, by taking advantage of the St George policy.

COMPARE MORTGAGE INSURANCE PREMIUMS BEFORE DECIDING

Borrowers always look at lenders interest rates, product features, application fees and ongoing monthly fees, but often fail to directly compare LMI premium rates charged by different lenders. Using the above example, a 95% “full doc” loan of $380,000 (with genuine savings) is required to purchase a property valued at $400,000. The once-only LMI premiums charged by different lenders can vary considerably. Based on premium rate tables currently published on lender websites, LMI premiums would be as follows (state government stamp duty not included):

St George	1.67%	$6346
Westpac	2.09%	$7942
Suncorp	2.28%	$8664
RAMS	2.34%	$8892
HomeSide	2.38%	$9044

While interest rates and fees are important, it also pays to compare the LMI premiums of different lenders before making a final decision.

Melbourne Mortgage Finance is usually available to assist you with loan enquiries and customer loan applications on a “same day” basis. Please call or email at any time.

Barry LeBrocq

Melbourne Mortgage Finance
Mob 0437417042
Web www.melbournemortgagefinance.com.au

Disclaimer: the above information is intended as general information only and is not intended to cover specific personal situations. Every effort has been made to ensure that content is accurate, however it should be understood that lenders are constantly changing their products, interest rates and lending policies. Potential borrowers should contact Melbourne Mortgage Finance to discuss their specific personal financial needs and loan eligibility prior to making a borrowing decision.