Refinancing your home loan: Why LVR could be your best bargaining chip

By Katherine O'Chee ·

As competition in the home loan market intensifies, some lenders are staying ahead by offering their biggest rate discounts to borrowers with lower loan-to-value ratios (LVRs). 

LVR refers to the percentage of property value that is still owed to your lender, so as you pay down your home loan, your LVR should also decrease. 

This means that if you’ve been repaying your current mortgage for a few years now, your LVR could give you a significant upper hand when refinancing

According to Mozo data, if you refinance with a 70% LVR, you could snag average variable rates that are 51 basis points better than a 90% LVR loan.*

That 0.51% rate difference could potentially cut down your monthly repayments by hundreds of dollars, depending on your loan size and term. For instance, for a $400,000 mortgage over 25 years, you could save as much as $107 in repayments per month.

Average variable rates based on LVR

How much property value belongs to you?
LVRAverage variable rate**
Monthly repayments (for $400,000 loan over 25 years)

Just bear in mind that the above averages are based on advertised rates only. However with the exception of a handful of providers like Athena and 86 400, many lenders don’t actually advertise rate tiers below 80% LVR. 

That’s when your LVR could become a powerful bargaining chip. 

Mozo’s property expert, Steve Jovcevski said that rather than relying on the lender to hand over a more competitive deal, it may be up to the borrower themselves to calculate their LVR and negotiate down their rate accordingly.

“If you have a lower LVR, it’s good for negotiating power because it makes you a higher quality borrower, which means you’re considered lower risk to the bank and would also lower their cost of funding,” Jovcevski said.

“Banks can make a bigger profit margin on those higher quality borrowers when they offer the same rates to a customer with 70% LVR as someone with 80% LVR. 

“So even if a lender is advertising a good rate for LVRs up to 80%, it’s important to remember you could get an even better rate than what’s advertised with your 70% LVR.”

How to negotiate your rate

So how do you go about using your LVR to snag a better rate? The first step is doing the maths and getting an estimate of your own LVR:

LVR = loan amount ÷ property value

Your loan amount is the principal you haven’t paid off yet, while to figure out your property value, you can take advantage of a free valuation offered by all the big banks.

Just be mindful that lenders may be more conservative in their own valuations to reduce risk for themselves, so chances are your actual LVR will be higher in the bank’s eyes. To counter this, Jovcevski recommends adding at least 5% on top of your estimated LVR. For instance, if you think your LVR is 65%, assume that the bank will see it as 70% or 75%. 

Once you’ve shopped around and found a deal you’re happy with, talk to the lender. Ask whether your lower LVR will make a difference to your rate. And when they’ve done their valuation, it’s worth calculating your LVR again to double check that they’ve offered you the correct rate for your LVR. 

RELATED: Why 1% difference in your home loan rate matters

Ready to start your search for a sharper home loan rate today? 

Get started with a few competitive deals for refinancers below, or head over to the Mozo refinance home loan hub to compare even more offers.

Compare refinance home loans - last updated November 27, 2020

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.

I want to borrow


  • 1.99% p.a.variable for 12 months and then 2.48% p.a. variable

    2.47% p.a.

  • mozo-experts-choice-2020

    1.95% p.a.
    fixed 3 years

    2.36% p.a.

  • 1.99% p.a.variable for 24 months and then 2.50% p.a. variable

    2.93% p.a.

  • mozo-experts-choice-2020

    2.34% p.a. variableApply now to get this rate from 29 Nov

    2.34% p.a.Apply now to get this rate from 29 Nov

  • 2.59% p.a. variable

    2.76% p.a.


Talk to a Mozo home loans expert

Buying your first home, refinancing your existing home or thinking of investing? Speak to Steve, our home loans expert today!

*Calculations draw on average rates outlined in the table.
**These rates are averages of loans only available at that particular LVR tier. Averages as of 25 September 2020, assuming an owner occupier making principal and loan repayments on a $400k loan.

^See information about the Mozo Experts Choice Home Loans Awards

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Katherine O'Chee
Money writer

Katherine O’Chee is Mozo’s international money transfer and forex expert and business banking writer. She keeps Mozo’s readers on top of the latest news and writes in-depth features to inform and help Australians make smarter financial decisions. Her work has been published in major media outlets including Sydney Morning Herald, SBS News and Bangkok Post. She has a Bachelor of Arts (Media and Communications) from the University of Sydney.