What is a 60% LVR home loan?
A 60% loan-to-value ratio (LVR) home loan is one that sees the buyer pay a 40% deposit upfront and borrow the remaining 60% of the price of the property.
LVRs of 60% or less are common among refinancers, too. If you’re refinancing a home loan, your equity will generally be counted instead of a deposit. So, if your home is worth $1 million and you're refinancing a $600,000 mortgage, you’ll likely have a 60% LVR.
How to compare 60% LVR home loans
Many lenders offer mortgages with lower rates, better features, or more flexible terms to borrowers with 60% LVRs.
The table at the top of this page can help you compare rates on home loans available to borrowers with up to 60% LVRs from our online partners.
What to know about 60% LVR home loans
Here are some of the key things you might want to know about 60% LVR home loans if you're considering buying or refinancing.
What’s a good 60% LVR interest rate?
A 60% LVR is generally considered far less risky for a lender, as it’s likely able to recover all its money if the borrower defaults and the property is repossessed. Because of that, a 60% LVR home loan typically unlocks access to a lender’s most competitive (lowest) interest rates and loan features.
You can sort the table above by lowest interest rate to compare home loan rates currently available to borrowers with 60% LVRs.
Look at comparison rates too
Don’t be tempted by what looks like an enticing interest rate. A low-rate home loan may be a tempting affair, but it could be hiding extra fees and ongoing charges.
Pay close attention to ‘comparison rates’ on home loans, which also factor in relevant fees and charges. That way, they can give you a better idea of the ‘true cost’ of a home loan.
What should I consider when comparing 60% LVR Home Loans?
A mortgage is more than just its interest rate. When comparing home loans, think wisely about your financial situation and the loan features that best suit it.
Ask yourself the questions below before making a decision:
How long do I want to spend repaying my home loan?
- A longer loan term may mean lower regular repayments
- A shorter term can lessen overall interest costs
Do I plan to make extra repayments?
If you plan to pay more than your minimum repayment each week, fortnight, or month, or you plan to make a lump sum repayment in the future, you might want to consider a home loan with a redraw facility. That way, you have the flexibility to ‘redraw’ the extra money you’ve put towards your home loan if and when you need it.
Note that redraw facilities are typically restricted to variable rate home loans. Though some fixed rate home loans may allow a borrower to pay a certain amount extra towards their mortgage each year, and this may be able to be redrawn. Though, if you exceed these limits, you could incur significant fees.
Would I like the option to reduce interest costs using my cash savings?
Some home loans provide offset accounts, which function similarly to a savings account. However, instead of paying you interest on your deposits, it is ‘offset’ against your home loan’s principal balance, reducing the funds that interest accrues on. Keeping a balance in your offset account can help funnel more of your repayments towards repaying your principal balance, rather than towards interest, which could shorten your loan term.
Keep in mind that offset accounts are typically exclusively offered on variable rate loans. If you want to fix your rate and also have an offset account, you could ask your lender about a split home loan. These let you divide your total balance into two parts: one with a fixed interest rate and one with a variable rate, potentially giving you the stability of a fixed rate with access to an offset account for the variable portion.
Would I prefer repayment certainty or flexibility?
Variable rates can change over time, meaning a home loan’s repayments can rise and fall, while fixed rates will remain the same for a set period of time. This can offer increased certainty, but pricey break fees can apply if you refinance or sell your property before the fixed term ends.
For some borrowers, the value of certainty outweighs the risk of variable rate volatility. To others, the flexibility and features offered in variable rate home loans (like redraw facilities, offset accounts, and the ability to make unlimited extra repayments) can outweigh the risk.
Do I need extra flexibility from my home loan lender?
Some lenders may allow you to ‘adjust’ your mortgage without having to refinance:
- A top-up feature may let you borrow more against your equity in the future without submitting a new application.
- If you plan to move, home loan portability lets you retain your home address despite switching addresses.
Keep in mind that these features are not available on all home loans.
However, with a 60% LVR home loan, there may be fewer barriers to refinancing, giving you the freedom to choose between ‘adjusting’ or ‘refinancing’.
Do you need to pay Lenders Mortgage Insurance (LMI) with a 60% LVR?
No, you will not need to pay Lenders Mortgage Insurance (LMI) with a 60% LVR.
LMI shields the lender from monetary losses if the borrower fails to repay their loan. It is the borrower’s responsibility to pay for LMI when they take out a home loan.
Typically, LMI is reserved for home loans with an LVR of 80% or higher. A higher LVR indicates more risk for the lender, as they have more to lose if the buyer fails to service their loan.
Is a 60% LVR home loan worth it?
Ultimately, whether a 60% LVR home loan is worth it will depend on your personal situation. Here’s a list of pros and cons to think about before making a choice:
60% LVR home loan pros
- Lower interest rates: A 60% LVR home loan may give you access to the most competitive interest rates lenders are willing to offer, potentially saving you tens of thousands of dollars in interest over the life of your loan.
- Shorter loan term: With a 40% deposit, you may need to borrow less, which can allow you to choose a shorter loan term. Paying your outstanding debt off quicker could save you thousands in interest.
- Easier and faster approvals: As 60% LVRs represent less risk, lenders may offer speedier approval and processing times. Though this may differ from lender to lender.
- More equity: Simply put, the bigger your deposit, the more equity you hold on day one of a home loan.
60% LVR home loan cons
- Time taken to save: Depending on your income, saving for a 40% deposit could take years, and house prices could climb rapidly in that time, potentially outpacing your savings rate.
- Risk of being cash poor: If you’re pouring most of your life savings into a 40% deposit, you run the risk of having no financial buffer for unexpected emergencies.
- Opportunity cost: If most of your savings are tied up in your home, you could be missing out on other investment opportunities.
