How your LVR tier could get you a lower home loan interest rate

Collage of people comparing LVR interest rates.

Whether you’re refinancing or taking out your initial home loan, lenders will be keen to establish your loan-to-value ratio (LVR). This critical number determines how much of your property you’ll own from day dot, as well as what interest rate you’re eligible for. 

When you first get your mortgage, your LVR will depend on the size of your housing deposit. If you’re refinancing, it will depend on your equity. Both your deposit and equity establish your financial stake in your home, and therefore how risky you are to the lender. Low financial stakes for you means high financial stakes for them – hence, a higher interest rate.

So how much does your LVR affect your home loan interest rate? Let’s look at the numbers.

Average variable interest rates by LVR tier

According to data from the Mozo database, the average variable interest rate for each LVR tier drops significantly the more of your home you own. 

Average variable interest rates by LVR tier (22 November 2023)

LVR tierAverage variable rate
7.33% p.a.
90%7.08% p.a.
80%6.77% p.a.
70%6.73% p.a.
60%6.69% p.a

So how much of a difference could this make to your monthly repayments? While stumping up a larger deposit and lower LVR can increase your upfront costs, long-term it could mean thousands of dollars less in interest, plus avoiding the pain of Lenders Mortgage Insurance.

The differences between 60% and 80% LVR interest rates may not be huge, but the difference between 95% and 80% certainly is. 

Borrower scenario: How home loan LVR tier affects monthly repayments

Collage of people cost crunching their home loan by their house.

Let’s say Ally wants to buy a $500,000 house with a 25-year mortgage, but can’t decide what size deposit (and therefore which LVR tier) she should go for. Here’s a breakdown of some of her home loan costs, not including any agent/lender fees or stamp duty.

Deposit (%)Deposit ($)LVR tierInterest rateMonthly repaymentsTotal interest
7.33% p.a.
10%$50k90%7.08% p.a.$3,559$567,836
20%$100k80%6.77% p.a.$3,461$538,262
30%$150k70%6.73% p.a.$3,448$534,474
40%$200k60%6.69% p.a.$3,436$530,691

If Ally decides to only spend $25k upfront, she would pay $591,953 in interest over the life of her mortgage. However, she would also likely have to pay Lenders Mortgage Insurance because she’s buying with a small deposit, which could add to her monthly costs considerably.

If she opts for the standard 20% deposit, she would pay $75k more upfront and only save $57,479 in interest over time, but it would also bring down her monthly repayments by $179, plus any Lenders Mortgage Insurance she wouldn't have to pay. 

Later on, if she’s built up enough equity and qualifies for a 60% LVR, Ally could refinance from her current interest rate to a lower one. For instance, if she dropped from 7.33% to 6.69%, she could save $204 a month. 

With the cost of financing a home skyrocketing, it’s vital to weigh up how a simple number like your LVR can impact your short-term and long-term costs. Is it better to buy into the market quicker with a smaller deposit, or save harder for longer and pay less over time?

Laying it all out and comparing your options can help you reach a decision that works for you. 

Compare low interest rate home loans below.

Compare low interest home loans - last updated 3 December 2023

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Mozo Expert Choice Badge
    Variable Rate Home Loan Special Offer

    Package, Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.51% p.a.

    Package benefits across Home Loans, Visa Credit Card, Personal Loans and Term Deposits. No package fee for the first year. No application, settlement or redraw fees to pay. Quick and easy application. Free CoreLogic RP Data property reports. *Terms, conditions and lending criteria apply.

  • Offset Home Loan

    Package, Owner Occupier, LVR<60%, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.39% p.a.

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Flex Home Loan

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.19% p.a. variable
    6.43% p.a.

    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.

  • Well Balanced Special Offer

    Owner Occupier, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.12% p.a. variable
    6.14% p.a.

    Competitive low rates available for owner occupiers. Free online redraws. 100% offset account for a small fee ($10 p/mth). Quick and easy application online. Get a free evaluation (Valued up to $300). Minimum loan amount $100K.


* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.