While you may already know that better home loan deals are on offer for home loans at 80% (having 20% deposit or equity in the property), what many people do not know is that most lenders have another tier of pricing reserved for applicants who have a 60% LVR (having a 40% deposit when buying, or 40% equity in their property when refinancing existing loans).
Lenders typically consider a 60% LVR Home Loan a lower risk application, meaning that they can potentially offer pricing that is even sharper than the 80% or 70% LVR tiers. Read on to make sure you get a great deal if you are at or under a 60% LVR!
As expert mortgage brokers, Simplifi Lending are experts in making sure you get an amazing deal if you are under 60% LVR for your home lending. While many banks offer special offers and sharper interest rates for these applicants, the offer will still be subject to full credit assessment and that lender’s specific policy and they may have minimum loan amount requirements as well. If you have a 60% LVR but they won’t accept your income or other factors under their policy, you can still get declined!
Through our Home Loan Application Process, and specifically in your preliminary assessment, we will do the research across our panel of over 40 top home lenders to make sure we match you with a lender who is not only offering a great deal for your home loan, but whose policy you also meet.
Home loan applicants with a 60% LVR are typically considered very low risk due to the likelihood that the bank would recover the outstanding home loan balance in the event of a default and repossession of the property. Banks may also have lower capital requirements for these applicants and these factors mean many lenders tend to offer a better interest rate to a client with a low LVR. Lower rates also mean lower interest costs and loan repayments for you.
Many lenders have an algorithm or scorecard that is the first ‘check’ in any home loan application process. Having a low LVR can significantly improve how an application scores when initially submitted and may also increase the likelihood of a lender accepting other small issues (i.e. a missed repayment or two) due to the low overall risk of the application.
If your LVR is at 60%, you are well under the level where lender’s mortgage insurance (LMI) is required. This is typically only payable where the LVR is over 80%. Avoiding LMI can save you thousands of dollars in upfront costs.
The lower interest rate on a 60% LVR Home Loan may mean that you have a slightly higher borrowing capacity, simply due to the lower interest rate that may be available to you. The interest rate is an important factor lenders consider when assessing your capacity.
Depending on loan size, lenders may compete very strongly for low LVR business and this may even involve annual package or other fee waivers (typically, these are more common with loan sizes of $1M+ in combination with a low LVR). Eligible home buyers also have access to a wider range of lenders, reducing the likelihood of other upfront costs like valuation and credit risk fees.
There aren’t many limitations if your LVR is 60% or less. The main criteria and restrictions are really just the standard home loan application criteria:
Even if you have a low LVR, lenders will still expect a clean credit history from their applicants. This means repayments on existing debts need to be on time, no defaults or court judgements on file and no other adverse items listed. If you have one or two minor issues, lenders may be more forgiving of this as your LVR is a lower risk overall.
A low LVR is an excellent start, however your home loan application will still be assessed like any other application. Your income must be acceptable to the bank including policies such as time in employment, industry experience, consistency of income etc.
For more information on more complex types of income when looking to apply, read more below:
The lender you are looking to apply with will still conduct a borrowing power assessment (also called a servicing assessment). They need to make sure you can afford the proposed loan repayments in addition to your basic living expenses and other commitments. This assessment can be quite conservative and usually includes a buffer of 3.00%p.a. being added to the proposed home loan rate. You will need to have sufficient income to still service the loan including this buffer.
As expert mortgage brokers, it is our role to conduct a thorough assessment of your individual position and then match you with the right lender while ensuring you have the highest possible chance of approval. Having a low LVR means you likely qualify for a very competitive interest rate as long as lender assessment criteria are met.
We will manage every aspect of the process for you- from research to presentation of options and the application itself. Let us do the hard work and make getting an amazing home loan deal simple.
The standard requirements for a home loan application are as below:
All lenders require identification for home loan applicants. A passport and driver’s licence will cover the requirements of most lenders, however substitute documents include birth certificates, 18+ cards, Medicare card and utility/rates bills. If you don’t have a passport or licence, your mortgage broker will let you know which documents can be substituted
In order to do a full assessment of your application, the lender will require details of your current financial position, including bank statements for loans and/or savings. This information can all be provided easily and securely in our secure client portal. Our expert mortgage brokers will confirm exactly what is required for your application and this will all be included in the portal. For more details, check out our home loan application process page.
Regardless of whether you are purchasing the property or refinancing from another lender, we will need to get your property valued to have an accurate market value and to know what LVR you are sitting at. With most lenders we can organise this at no cost to you at all, however if your chosen lender has a valuation fee we will confirm this before ordering it for you.
Are you ready to get started with your 60% LVR home loan application? Contact us today to speak with an expert mortgage broker and book your no-obligation Preliminary Assessment.
Absolutely- once you have reached 60% LVR, you are considered a prime applicant by the vast majority of lenders. You have a substantial amount of equity available and are well below the level with Lender’s Mortgage Insurance is required. This may enable you to access great rates, potential fee waivers or to access equity for property investment or debt consolidation if desired.
It is much easier to refinance with a 60% LVR. Even if the valuation received from the lender is lower than expected, you will likely still have more than sufficient equity to refinance. If your loan is older then 1-2 years and hasn’t been reviewed recently or it has increased significantly in value, refinancing can be a great way to access a better deal.
The LVR of your home loan application has no bearing at all on the stamp duty calculations- stamp duty is essentially a tax paid to your state or federal government as part of purchasing a property. The stamp duty payable is calculated based on the purchase price of the property and the amount borrowed doesn’t change this at all. That being said, you may be able to access stamp duty concessions if you are a first home buyer or are purchasing your next home as an owner occupier.
The short answer here is no- Lender’s Mortgage Insurance is typically only payable if you are borrowing more than 80% of the property value. Some high density units in certain locations may have this payable at 70% LVR as well but at 60% it is incredibly unlikely to be a factor.
