Securing a 90% LVR Investment Loan with LMI Waiver for a Seasoned Accountant

The Client’s Situation

Mark, a 35-year-old seasoned property investor, approached Zenith seeking assistance to purchase his second investment property. He had found an ideal property priced at $1,875,000 but had no deposit saved. Mark’s older sister, Sarah, offered to act as a guarantor using the equity in her own home. However, Sarah already had an existing mortgage on her property and didn’t want to refinance or close it.

The Challenge

The main challenges in this case were:

• Mark needed a loan to cover the full purchase price plus stamp duty and other costs
• Sarah was willing to be a guarantor but wanted to keep her existing mortgage
• Finding a lender that would accept a second mortgage on the guarantor’s property for a large investment loan

Our Approach

We recognised that a family guarantor loan could be the solution for Mark’s investment goals. We approached the situation by:

1. Assessing Mark’s Financial Situation: We reviewed Mark’s income, expenses, and existing investment property performance to ensure he could service the substantial loan repayments.
2. Evaluating Sarah’s Property: We assessed the equity available in Sarah’s home to determine the guarantee amount, considering her existing mortgage.
3. Lender Research: We identified lenders offering family guarantor loans for investment properties that would accept a second mortgage on the guarantor’s property.
4. Loan Structure Planning: We designed a loan structure that would cover the purchase price and associated costs while working with Sarah’s existing mortgage.

The Process

Our process involved several key steps:

1. Client Education: We thoroughly explained to Mark and Sarah how the family guarantor loan works, including:
   • The implications of a second mortgage on Sarah’s property
   • The limited nature of Sarah’s liability as a guarantor
   • The process for releasing the guarantee once Mark builds sufficient equity

a

Client Profile:

John, a 38-year-old Certified Practicing Accountant (CPA), approached Zenith for assistance in obtaining an investment loan. With 12 years of experience in the accounting industry, John had recently changed roles but remained in his field of expertise.

The Scene:

• John wanted to purchase an investment property valued at $800,000
• He had a 10% deposit ($80,000) and needed to borrow 90% of the property value
• He had already put aside the amount needed to cover the Transfer Duty
• Typically, a 90% LVR loan would require Lenders Mortgage Insurance (LMI)
• John had recently changed jobs, which can sometimes complicate loan applications

Our Approach:

1. We assessed John’s eligibility for an LMI waiver based on his profession and industry experience.
2. We identified lenders offering LMI waivers for accounting professionals.
3. We prepared a comprehensive loan application highlighting John’s qualifications and experience.

The Process:

1. Professional Qualification Verification:
   • Confirmed John’s CPA membership status
   • Verified his long tenure in the accounting industry
2. Lender Selection:
   • Identified lenders offering LMI waivers for accountants borrowing up to 90% LVR
   • Focused on lenders who consider overall industry experience rather than tenure in their current role
3. Application Preparation:
   • Compiled John’s financial documents, including payslips and employment contracts from his new role
   • Prepared a statement explaining his recent job change within the same industry
4. Negotiation with Lenders:
   • Presented John’s case, emphasising his long-standing industry experience
   • Addressed any concerns about his recent job change

The Outcome:

We successfully:

• Secured a $720,000 investment loan (90% LVR) for John
• Obtained an LMI waiver, saving John approximately $15,000 in LMI premiums
• Negotiated competitive interest rates despite the high LVR
• Overcame potential obstacles related to John’s recent job change

John was able to purchase his investment property with only a 10% deposit and without incurring LMI costs, maximizing his investment potential.

Conclusion:

This case study demonstrates the value of working with a broker who understands profession-specific lending policies. By leveraging John’s qualifications and experience, we secured an LMI waiver despite his recent job change, enabling him to enter the investment property market with minimal upfront costs.

2. Lender Negotiation: We approached selected lenders, highlighting:
   • Mark’s strong financial position and investment experience
   • Sarah’s significant equity position in her property, even with the existing mortgage
   • The willingness to structure the guarantee as a second mortgage
3. Loan Application: We prepared a comprehensive loan application, emphasising:
   • The sibling relationship between Mark and Sarah
   • The limited nature of the guarantee
   • The strength of Mark’s financial position
4. Guarantee Structure: We worked with the chosen lender to structure the loan as follows:
   • An 80% loan ($1,500,000) secured against Mark’s purchased property
   • A 27% loan ($506,250) secured by a second mortgage on Sarah’s property to cover stamp duty and other purchase-related costs

The Outcome

After a focused process, we successfully:

• Secured a total loan of $2,006,250 for Mark’s second investment property purchase and associated costs
• Found a lender willing to accept a second mortgage on Sarah’s property as additional security
• Structured the loan with no deposit required from Mark
• Avoided the need for Lenders Mortgage Insurance
• Ensured Sarah’s liability was limited to 27% of the property value
• Implemented a plan to release the guarantee once Mark builds sufficient equity in the property

Mark was able to expand his investment portfolio with a high-value property, while Sarah was able to help her brother grow his investments while keeping her existing mortgage intact and limiting her own risk.

Conclusion

This case study demonstrates how family guarantor loans can be tailored to suit experienced investors looking to expand their portfolios without needing a deposit and covering all associated costs. At Zenith, we understand the intricacies of these loans and work to find financing solutions that meet both the investor’s and guarantor’s needs, even for substantial loan amounts.