Want to refinance? Your LVR is the secret to getting a lower interest rate
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Your loan-to-value ratio (LVR) refers to the amount of money you need to borrow in comparison to a property’s value, and it’s expressed as a percentage.
For example, if you’re buying a home worth $1 million and you have a $200,000 deposit, your loan would be $800,000 and your LVR would be 80%. The smaller your deposit or equity, the higher your LVR will be and vice versa.
But as you pay off your home loan, your LVR is also likely to decrease, so another way to think of LVR is the percentage of property value that you own outright – that’s known as your home equity.
Why your LVR is a powerful bargaining chip
Your loan-to-value ratio can be used to your advantage when negotiating your interest rate with a lender.
That’s because LVR is one of the metrics used to assess your borrowing risk, and the lower your LVR is, the safer you’re considered as a borrower.
Lenders will likely offer their lowest rates to those with lower loan-to-value ratios, so if you’ve been paying off your home loan for a few years and you’ve managed to lower your LVR, you could be in a position to score a better rate if you choose to refinance your home loan.
Refinance your home loan using LVR
How much could you save with a lower LVR?
The average variable rate for a 90% LVR is 6.14% p.a. according to Mozo’s database, while the average for an LVR of 70% is 5.85% p.a. – that’s 29 basis points lower.
Depending on the size of your loan and how many years you’ve got to pay it off, a rate cut of 0.29% could reduce your monthly repayments and help you pay less interest if you were to refinance.
Use our mortgage repayments calculator to work out how much you’d pay each month depending on your interest rate.
| LVR | Average variable rate (p.a.) | Monthly repayments |
|---|---|---|
| 60% | 5.79% | $3,158 |
| 70% | 5.85% | $3,176 |
| 80% | 5.87% | $3,182 |
| 90% | 6.14% | $3,264 |
| Source: Mozo database on 17 September, 2025. Average variable rates for owner occupiers, making principal and interest repayments on a $500,000 loan over 25 years. | ||
For example, on a $500,000 loan being paid off over 25 years, you could save $88 in repayments each month, which shakes out to be just over $1,000 in one year.
That’s why it’s so important to compare home loans – even after you already have one – to ensure you’re always getting a competitive rate as your LVR gets lower.
Remember that the interest rates in the table above are averages, and there are plenty of lower rates available to mortgage holders with lower LVRs who are looking to switch.