Money

Don't forget mortgage insurance

Noel Whittaker
Noel Whittaker

THE ongoing volatility in interest rates has generated the predictable hype about  borrowers taking matters into their own hands and switching lenders.

Unfortunately in most cases changing lenders is like swapping spouses - an expensive exercise with no guarantee that the outcome will be an improvement.

The main stumbling block is mortgage insurance, which is compulsory if the loan to valuation ratio (LVR) is more than 80%.

Think about a couple who are considering buying their first home, and who wish to borrow $570,000.  They have been attracted by all the huge newspaper advertisements and decide to go to Lender A because that institution is offering the cheapest rate. 

They have only 5% deposit so the LVR is 95%, -  they have not even given a thought to what the mortgage insurance premium may be.

The lender they choose charges them a premium of 3.9% or $22,230 and they happily sign up. They have no idea that another lender, possibly offering a slightly higher interest rate, may offer them the same loan but with a mortgage insurance premium of  2.41% or $13,737 -a massive $8,493 difference.

Of course, the government gets into the act as well and adds a hefty sum for stamp duty which ranges from 5.37% in Queensland to 11.8% in South Australia.

The mortgage insurance and stamp duty is invariably added to the loan which means they will be paying it off over the life of the loan.

After a couple of years our young couple find that their chosen lender has elected to increase interest rates to a level which is higher than most of its competitors.

Even though their house may have increased slightly in value, their LVR is still going to be 95% because the loan has been increased by the mortgage insurance premium and stamp duty.  To their horror, they discover that the new lender will want fresh mortgage insurance - they will be up for another lot of fees which would be at least $13,737, even if they chose the cheapest premium on offer. 

It would be most unlikely that they could obtain any refund of the original mortgage insurance premium.

Noel Whittaker is a co-founder of Whittaker Macnaught Pty Ltd.  His advice is general in nature and readers should seek their own professional advice before making any financial decisions.  His email is noelwhit@gmail.com

Topics:  home loan mortgage noel whittaker opinion



Science Festival seriously awesome

CALLING everyone who wants to see, hear and be a part of something totally cool: this is where you need to be this March.

Drink where the cool kids do this summer

There are a bunch of new bars open in Brisbane, make sure you're there!

CHECK out these new funky bars.

Discover Brisbane’s laneway gems

Brisbane's laneways will surprise you.

NOT all of Brisbane City is as it seems…

Top five things to experience this summer in Brisbane

Tangalooma is amazing if you're keen for a dive, kayak or swim.

THIS summer get out and explore your capital city.

Don’t go chasing waterfalls…find them on these drives!

The Scenic Rim is just one place nearby that you'll love.

BRISBANE isn’t all bright lights and city slickers.

Your boots are made for walking these tours

Brisbane Greeters tours are a great way to learn the local history of the city.

YOU don’t need a bike or bus for a seriously good tour of Brisbane.

Is Brisbane the new arts and culture capital?

Check out GOMA's latest exhibition - it's all about hair! GOMA 10 Ambassador Patience Hodgson visits Nervescape V 2016 by Icelandic artist Hrafnhildur Arnardóttir (aka Shoplifter), commissioned for ‘Sugar Spin: you, me, art and everything’ at the Gallery of Modern Art, Brisbane. 
Photograph: Natasha Harth, QAGOMA

THE rest of the world should be envious of this line-up!

BREAKING: Two firecrews rush to The Bacon Factory

The alarm was triggered shortly before 3.30pm

An alarm was sounded about 12pm today.

Want some business ideas? Head to town hall tomorrow

Brisbane Lions coach Chris Fagan (left) with Hugh McCluggage late last year, the number 3 draft pick for the Brisbane Lions.

Spots still available for business session with Brisbane Lions

Berlin Wall fragment lands in Warwick

COLD WAR COLLECTABLE: Dell Maxwell, with the Berlin Wall fragment, is helping to organise the annual book store in Warwick.

A token of the Cold War has turned up in Warwick

Local Partners

Berlin Wall fragment lands in Warwick

A token marking the end of the Cold War has turned up in the most unlikely spot; an old box of books donated to a fundraising event in Warwick.


Sir Elton John coming to Mackay: What you need to know

Sir Elton will come to Mackay and Cairns in September.

Tickets to the concert go on sale on March 14

MAJOR ANNOUNCEMENT: Global superstar to rock Mackay in 2017

A major concert is set to rock Mackay this year.

Mackay, Cairns to host world's biggest superstars Sir Elton John

Fun for all at Killarney Show

IN FORM: Mitchell Muller from Tannymorel won class four of the led steer judging at the Killarney Show in 2016.

Check out what's on over three big days in Killarney

Sir Elton John coming to Mackay: What you need to know

MACKAY will play host to one of the world's biggest superstars Sir Elton John later this year.

MAJOR ANNOUNCEMENT: Global superstar to rock Mackay in 2017

A major concert is set to rock Mackay this year.

Mackay, Cairns to host world's biggest superstars Sir Elton John

Robert Irwin introduces Jimmy Fallon to wild guests

Robert Irwin introduces Tonight Show host Jimmy Fallon to a cuddly sloth.

ROBERT Irwin continues Steve's legacy.

MOVIE REVIEW: Trespass Against Us a 'tender' crime film

Michael Fassbender and Brendan Gleeson in a scene from the movie Trespass Against Us.

Tough British film about criminal clan proves touching

Crocodile, hippo fears as I'm A Celeb filming hit by flooding

Flooding hits the set of I'm A Celebrity ... Get Me Out Of Here!

Fears crocodiles and hippos could infiltrate I'm A Celeb camp

Small screen users make switch to smaller screens

In this photo taken Oct. 16, 2013, a girl plays Supercelll's Hay Day game on an iPad. The Finnish 'Clash of Clans' mobile game maker Supercell said Wednesday, Feb. 12, 2014, it plans to launch its third game next month on a tide of soaring revenues and profits. The new game, 'Boom Beach,' will be launched in March. It's been tested in Canada and Australia, ranking fifth in both countries' iPhone app store lists, according to the company. (AP Photo/Lehtikuva, Milla Takala)  FINLAND OUT

The digital age generation makes the switch

Nadia visits Coast to escape Married At First Sight drama

Married At First Sight's Nadia Stamp takes a breather from the show's drama at Mooloolaba.

MAFS bride unwinds on the Coast ahead of commitment ceremony

Popular island resort sells to loaded international investor

OUR PICK: Chris Foey's colourful shot of one of Gladstone's great tourism hot spots, Heron Island.

International investor snaps up piece of Gladstone paradise.

Expert: Why renters, home buyers may struggle

Matusik Property Insights director Michael Matusik.

What's next for the city's housing market

Massive seaside development of 3200 lots

DESIRABLE LIFESTYLE: The masterplan for the proposed Elliott Heads Estate.

"There's nothing else left along the coastline of Queensland now"

Potential home buyers punished for doing the 'right thing'

Should I go to university or buy a house?

50 more high rise buildings planned for Brisbane CBD

Height limits have been scrapped for Brisbane CBD

800,000 more people expected to work in city over next 20 years

Ready to SELL your property?

Post Your Ad Here!