What is an 80% LVR home loan?
An 80% loan-to-value ratio (LVR) home loan is one where you as a homebuyer or refinancer must provide a deposit or equity worth at least 20% of your property’s value, in order to borrow the remaining 80%.
What to know about 80% LVR home loans
Historically, an 80% LVR has been considered the mortgage ‘sweet spot’.
You’ve likely heard that you need a deposit of 20% or more to get a home loan. These days, things are more flexible. Most banks and lenders will provide home loans to borrowers with deposits as small as 5%.
Be warned though, the higher the LVR, the higher the interest rate a borrower may pay, so if you have a deposit of less than 20%, don’t expect a lender’s sharpest rates.
Do you need to pay Lenders Mortgage Insurance (LMI) with an 80% LVR?
There’s one major reason many homebuyers, investors, and refinancers still aim for LVRs of 80% or less, and that is Lenders Mortgage Insurance (LMI).
LMI acts as a safety net for lenders in case a borrower can’t repay their debt. Most lenders will ask a borrower with a deposit of less than 20% (meaning an LVR of more than 80%) to pay for LMI, because they view these kinds of borrowers as riskier.
LMI can run into the thousands, or even tens of thousands of dollars, and it doesn’t offer any protection for the homeowner. It can be paid upfront or rolled into the cost of your home loan, but if you opt for the latter, you’ll pay interest on it over the lifetime of the loan.
It’s also important to be aware that LMI is not refundable, even if you refinance your loan or pay it off early. (Though, there are some exceptions if you pay the mortgage off entirely within a few years).
How to compare 80% LVR home loans
Comparing 80% LVR home loans is simple with Canstar. Just scroll to the top of this page, select your loan purpose, and follow the prompts. We’ll present a selection of mortgage products that might fit your needs.
Alternatively, you can browse products open to borrowers with LVRs of 80% on the table above.
What’s a good 80% LVR interest rate?
Interest rates on 80% LVR home loans tend to represent the middle of the market.
They might not be as low as those offered to borrowers with LVRs of, say, 60%, but they’re also generally lower than rates on 90% or 95% LVR home loans.
If you’re looking for a low-rate LVR home loan option, you can sort the table above by lowest interest rate to gauge rates currently available.
Don’t forget the comparison rate
Beware the interest rate honey-trap! A low-rate mortgage may look good at first glance, but when you factor in the fees and charges, it could end up a lot costlier than you bargained for. That’s why it’s vital to check a loan’s comparison rate, which combines the cost of interest as well as routine fees and charges to provide a reflection of the ‘true cost’ of a mortgage.
What else should I consider when comparing mortgage options?
The best mortgage fit for your needs might not be the one that offers the lowest interest rate. If you’re comparing your options, you might also want to think about what features or loan specifics might make a home loan suitable for your financial situation. Questions you might ask yourself include:
- How long do I want to spend repaying my home loan?
A longer loan term may mean lower regular repayments, while a shorter term can lessen overall interest costs. - Do I plan to make extra repayments?
If you want to pay more towards your mortgage each week, fortnight, or month, or make lump sum repayments down the track, you might want a home loan with a redraw facility. These let you ‘redraw’ extra repayments if you find yourself in need of cash. - Would I like the option to reduce interest costs using my cash savings?
Some home loans provide offset accounts, which act like savings accounts but, instead of paying interest on deposits, funds kept in an offset account ‘offset’ a home loan’s principal balance, reducing the funds interest accrues on. - 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 a fixed term ends. - Do I need extra flexibility from my home loan lender?
Some lenders may allow a borrower to ‘tweak’ their mortgage without the need to refinance. For instance, a top-up feature may let you borrow against your equity in the future without a whole new application. Or, if you plan to move soon, home loan portability could let you transfer your existing loan to a new property.
Am I eligible for an 80% LVR home loan?
When considering if you’re eligible for a home loan, lenders will generally take stock of your income, employment, savings, and trustworthiness as a borrower, which they can establish by looking at your bank statements and credit score.
Generally, if you can show you’re capable of repaying a home loan and you’re responsible with your finances, you have a good chance of securing a mortgage.
Though, if you want to access a home loan with a maximum LVR of 80%, you’ll also need to have a deposit or equity worth at least 20% of the value of the property you want to purchase or refinance (or have someone willing to act as a home loan guarantor).
How to calculate your home loan LVR
Wondering what your potential or actual LVR is? To calculate yours, simply divide how much you’d need to borrow by the value of the property you’re considering buying or refinancing, then multiply the outcome by 100.
So, if I had a $100,000 deposit and wanted to buy a $500,000 property, I’d probably need to borrow $400,000 to get the purchase across the line. Here’s how I’d calculate my LVR:
Loan amount ($400,000) ÷ property value ($500,000) = 0.8
0.8 x 100 = 80% LVR
Can I refinance with an LVR of 80%?
If you already have a home loan, you can likely refinance your home loan with an LVR of 80% or less. In fact, 80% might be the magic number that makes refinancing worthwhile.
If you try to refinance with an LVR higher than 80%, you’ll generally need to pay Lenders Mortgage Insurance (LMI) with your new bank, even if you’ve already paid it to your existing lender. This can wipe out any savings realised by switching to a lower interest rate.
Which lenders offer 80% LVR home loans?
The vast majority of banks and non-bank lenders in Australia offer home loans to borrowers with an LVR of 80% or less.
Because these loans are often considered to be relatively low risk, you will likely have access to a lender's full suite of products and, potentially, some of their most competitive interest rates.
You can compare a wide range of 80% LVR options in the comparison table above.
