Compare 80% lvr home loans

An LVR is a financial term you may come across in your home loan journey. The LVR, or loan-to-value ratio, of your home loan equates to how much money you’re borrowing (loan amount) versus the value of the property being purchased.

Lenders use this measuring tool to assess your riskiness as a borrower and it can determine your interest rate. In theory, the larger a deposit, the better your financial discipline and ability to potentially meet mortgage repayments.

For example, on a $500,000 property, if you saved $100,000 this would add up to a 20 per cent deposit. This means that you would therefore be borrowing the remaining 80 per cent of the property’s value as a loan from a lender. The loan-to-value ratio is 80 per cent.

There are a range of benefits to taking out an 80 per cent LVR home loan. In fact, it’s generally recommended to aim for a deposit minimum of 20 per cent due to the raft of benefits, including:

1. Avoiding LMI. Lenders mortgage insurance (LMI) is a pesky insurance you’ll need to pay if you have an LVR under 80 per cent. As mentioned above, there is higher risk to a lender by lending money to borrowers with smaller deposits than 20 per cent. This insurance helps to protect the lender in the event you default on the loan. It can cost tens of thousands of dollars, and an 80 per cent LVR is a helpful way to avoid this cost.
2. Less debt. Another benefit to consider is that the larger your deposit, the less debt you’re taking on by having a smaller home loan. This will not only mean smaller ongoing mortgage repayments, but less interest charged over the life of the loan.
3. Lower rates. Some lenders reward reliable borrowers with LVRs of 80 per cent by offering them more competitive interest rates. The lower your interest rate, the lower your mortgage repayments, which means good news for your budget. In fact, if you have a high LVR you may be offered a higher interest rate. 
4. Higher chance of approval. When applying for a home loan, you'll find that lenders have their own lending criteria. Most lenders will look at your bank account for proof that you are regularly saving and therefore more financially stable and eligible for a loan. If you have a 20 per cent or higher deposit, this may present you in a more favourable light to the lender, potentially increasing your chance of approval.
5. More loan options. Some lenders limit borrowers’ access to certain, more competitive, home loan products if they have smaller deposits. By searching for an 80 per cent LVR home loan you may have success to a greater variety of loan options with reduced fees, helpful features or credit card packages.

Saving up a 20 per cent deposit is no easy feat, especially if you’re looking to purchase property in Sydney or Melbourne where median prices are sky high. There are a few things home buyers can do now to try and bolster their home loan applications and potentially reach an LVR of 80 per cent with a larger deposit.

• Get a guarantor. If you’re not financially able to save up a 20 per cent deposit yourself, you may consider bringing on a guarantor. This involves having someone else (typically family) come on to your home loan and offer up security (typically home equity) to bolster your application. The guarantor may take financial responsibility if you were unable to meet mortgage repayments. It does not necessarily mean a guarantor covers the whole loan amount. In fact, you can bring a guarantor on to cover the gap in your deposit so you can aim for an 80 per cent LVR. It also means less risk to the lender that you may default on the loan.
• Boost your credit score. Your credit history is a key factor that determines not only whether you get a competitive interest rate from a lender, but whether you’ll be approved for a loan. If your credit score is not ideal, consider working on increasing it before you apply for your home loan.
• Move back home. Moving back home with family can be a very simple way to save more money. Rent is arguably the biggest ongoing bill you have and can often be more expensive than mortgage repayments. If you’re aiming for a 20 per cent deposit but still falling short, swallow your pride and head home for a little while to increase your savings.
• Downgrade or sell your car. A car is another costly expense that can significantly chip away at your budget when saving for a home. If you’re in a suburb with great access to public transport or ride sharing apps, consider selling your car for some extra cash. If this is not possible, you may want to consider downgrading to a more affordable model, just until your loan is approved.

The good news about 80 per cent LVRs is that you’re opening yourself up to a wider range of home loan options than if you saved a smaller deposit.

80 per cent LVR home loans are typically available to owner-occupiers and investors, whether shopping around for existing dwellings, land packages or new home builds. It will also afford you access to both fixed rate home loans and variable rate home loans. You may also gain access to loans with handy features, like an offset account, redraw facility or the ability to make extra repayments.

All that matters is the valuation of the property is within a range that your deposit does not fall below 80 per cent. Be careful in the real estate search and try to stay within a healthy property price range. This may mean not aiming for your dream postcode right away and looking in similar suburbs nearby – especially for first home buyers.

Also, try to keep up to date with the housing market, so you can watch for potential market value fluctuations. If there is a dip, that may be a more ideal time to buy property. But you may want to avoid buying in an area that will continue to lose property value, so be careful.

• Comparison tables. This comparison tool allows you to search for and filter down 80 per cent LVR home loans. You can enter the amount you want to borrow and property value to view loans within your LVR range. Then you can filter down and compare options side by side, to find a loan with an interest rate, fees and features that suit your financial needs.
• Calculators. Not sure which home loan to choose? A home loan calculator may be able to help. Narrow down your short list with a mortgage repayment calculator to see how your loan options and their potential repayment amounts stack up against your budget. You can even calculate how much you may be able to borrow to get a better idea of your LVR before you begin your mortgage search.
• Mortgage broker. Not sure if you’ll qualify for a 80% LVR home loan? It may be worth consulting with a mortgage broker. Mortgage brokers are considered experts in their field and may be able to offer advice and assistance in being approved for a home loan.