You want to buy a house in Melbourne's Northern Suburb. You have already seen some houses

and found one particularly impressive house. You are very keen to buy that property. The

asking price of that property is $875,000 and after having a successful negotiation you are

willing to pay $855,500. Your offer is conditional upon the loan approval within 30 days. The

house settlement period will be 60 days. However, after approaching your financial institution

(ANZ Bank) you have been given the following information about the loan conditions:

You can borrow up to 95% of the property price, however, in that case, you must take

compulsory LMI (lenders mortgage insurance) valued $36,166.26 which will be capitalised

with the loan amount. Alternatively, you can borrow up to 90% of the property price, and in

that case, the LMI will be $17,169.89 which will be capitalised with the original loan. You also

need to consider the following conditions before proceeding with the loan contract:

i. Loan application fee $855.00

ii. Land transfer fee and stamp duty $25,882

iii. Legal fee $1,200

iv. 1-year rates (council fee) in advance $3,459

v. Fully drawn down fee $890 (capitalised)

vi. Valuation fee $350

vii. Settlement fee $980 (capitalised)

The bank offers you a 5.99% special interest rate per annum. The duration of the loan is 30

years compounded monthly. You believe that this is a good opportunity for you, and you are

considering which LMI option to take. (Please show relevant calculations for each question)

Required:

i. How much do you need to have a deposit to apply for the 95% loan amount?

ii. How much do you need to have a deposit to apply for the 90% loan amount?

iii. What will be your monthly instalment (end of the month) at 95% loan amount if you

want to purchase the property?

iv. What will be your monthly instalment (end of the month) at 90% loan amount if you

want to purchase the property?

v. Under each scenario (i.e. 90% and 95% loan amount) what will be your monthly

instalment at the beginning of the month?