{"id":5373,"date":"2024-01-18T09:30:49","date_gmt":"2024-01-17T23:30:49","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5373"},"modified":"2024-01-18T09:30:49","modified_gmt":"2024-01-17T23:30:49","slug":"how-your-deposit-size-can-shape-the-rate-you-pay","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/how-your-deposit-size-can-shape-the-rate-you-pay\/","title":{"rendered":"How your deposit size can shape the rate you pay"},"content":{"rendered":"

\"\"It\u2019s commonly known that the bigger your deposit, the smaller your home loan, and thus, the lower your monthly repayments. But today we\u2019ll look into another way your deposit size could reduce your repayments: by potentially reducing your interest rate.<\/strong><\/p>\n

A question we\u2019re commonly asked (believe it or not!) is \u201chow can I get a lower interest rate?\u201d<\/p>\n

There\u2019s no straightforward answer to this one as it usually depends on a myriad of factors, including whether lenders see you as high risk or low risk, the competition in the market at the time and, as we\u2019ll discuss today, how big your deposit is \u2013 or more technically, your \u2018loan to value\u2019 (LVR) ratio.<\/p>\n

What\u2019s LVR?<\/h3>\n

To cut through the jargon, LVR refers to how much of your home\u2019s value you\u2019re borrowing.<\/p>\n

If you plan to buy a home priced at, say, $600,000 using a deposit of $120,000, you\u2019ll need to borrow $480,000, or 80% of the property\u2019s value. For lenders, this means you have an LVR of 80%.<\/p>\n

Why does this matter?<\/p>\n

Well, a bigger deposit lowers your LVR. This in turn helps reduce the risk you represent to a lender.<\/p>\n

A loan with an LVR of 80%, for example, may be seen as less risky than one with an LVR of 90%.<\/p>\n

As a general rule, lenders tend to reward borrowers for that reduction in risk with a lower home loan interest rate.<\/p>\n

But note: these figures don\u2019t include stamp duty and other up-front costs, which you may also need to budget for.<\/p>\n

Average interest rates by LVR<\/h3>\n

Mozo checked out the\u00a0average variable rates for different LVRs<\/a>.<\/p>\n

As you can see below, for home loans with an LVR of 95%, meaning a 5% deposit, the average variable rate is about 7.38%.<\/p>\n

Borrowers who can pull together a slightly bigger deposit may see their rate fall. As a guide, on an LVR of 90% (deposit of 10%), the average variable rate falls to 7.13%.<\/p>\n

That\u2019s a potential rate saving of 0.25%. This may not sound like much. But along with lowering your monthly repayments, a lower rate could mean paying less in interest charges over the life of your loan.<\/p>\n

\u2013 LVR 95%:<\/strong>\u00a0average variable rate of 7.38% p.a.
\n\u2013 LVR 90%:<\/strong>\u00a0average variable rate of 7.13% p.a.
\n\u2013 LVR 80%:<\/strong>\u00a0average variable rate of 6.85% p.a.
\n\u2013 LVR 70%:<\/strong>\u00a0average variable rate of 6.81% p.a.
\n\u2013 LVR 60%:<\/strong>\u00a0average variable rate of 6.77% p.a.<\/p>\n

How your LVR can see you save in other ways<\/h3>\n

Your LVR doesn\u2019t just shape the rate you\u2019re likely to pay.<\/p>\n

If you have a small deposit, usually less than 20%, you could be asked to pay lenders mortgage insurance (LMI).<\/p>\n

This is a type of cover that protects the lender if you can\u2019t keep up your loan repayments.<\/p>\n

LMI can be a substantial up-front cost.<\/p>\n

There are options for first home buyers with a small deposit to avoid this expense. The\u00a0First Home Guarantee Scheme<\/a>, for instance, allows eligible buyers to purchase a first home with just a 5% deposit and no LMI.<\/p>\n

What if I\u2019m refinancing my home loan?<\/h3>\n

If you\u2019re refinancing your mortgage, your LVR will be shaped by home equity.<\/p>\n

The same basic rule applies. The more equity you have in your place, the smaller the loan you may need.<\/p>\n

This may help lenders see you as a lower risk (all other things being equal), so chances are you may be offered a lower rate.<\/p>\n

How we can help<\/h3>\n

With so many loans and lenders to choose from, home loan interest rates can vary widely.<\/p>\n

Yes, your deposit or home equity can play a role in the rate you pay. But a variety of other factors come into play also.<\/p>\n

That\u2019s why it\u2019s important to speak to us if you\u2019re buying a first home, your next home, or refinancing.<\/p>\n

We can help you find a home loan that\u2019s suited to your needs at a competitive rate in line with your LVR and any other contributing factors.<\/p>\n

Disclaimer:<\/strong>\u00a0The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.<\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s commonly known that the bigger your deposit, the smaller your home loan, and thus, the lower your monthly repayments. But today we\u2019ll look into another way your deposit size could reduce your repayments: by potentially reducing your interest rate. A question we\u2019re commonly asked (believe it or not!) is \u201chow can I get a […]<\/p>\n","protected":false},"author":23,"featured_media":5374,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[110],"tags":[],"class_list":{"0":"post-5373","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-home-loans","8":"entry"},"yoast_head":"\nHow your deposit size can shape the rate you pay · FinancialPlus Mortgage Broker Gold Coast<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/financialplus.com.au\/how-your-deposit-size-can-shape-the-rate-you-pay\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How your deposit size can shape the rate you pay · FinancialPlus Mortgage Broker Gold Coast\" \/>\n<meta property=\"og:description\" content=\"It\u2019s commonly known that the bigger your deposit, the smaller your home loan, and thus, the lower your monthly repayments. 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