Have you heard people say ‘you should try to get to a 20% deposit for your home’ or something along those lines? There is a good reason that this is known as an excellent target for home savings- an 80% LVR (loan to value ratio) home loan is the level at which Lenders Mortgage Insurance (also called LMI) is typically not required when purchasing a home.
Read on to find out everything you need to know about 80% LVR Home Loans including features, benefits, limitations and how to apply!
As an expert mortgage broker with access to over 40 top home lenders, Simplifi Lending are able to take the hassle out of finding you an amazing home loan deal at 80% LVR. While there are sharper interest rates and offers as well as no LMI at 80% LVR, your application still needs to meet lender policy and pass credit assessment.
Your mortgage broker will conduct a free preliminary assessment to review your financial situation and make sure you qualify with your chosen lender, loan amount and/or purchase price and have the highest possible chance of having your home loan application approved.
With most lenders and for nearly all property types, having a 20% deposit (and therefore, an 80% LVR home loan) is sufficient to make sure you don’t need to pay for Lenders Mortgage Insurance (LMI). This one off payment of LMI can be thousands of dollars that are added onto the loan and avoiding this cost is a significant saving both upfront and over the life of the loan.
There are some specific property types where this may not be the case, particularly high density, inner city apartments. Your mortgage broker will make sure the property you are purchasing or refinancing is okay with your chosen lender in these cases.
The vast majority of lenders will price an 80% LVR home loan at a sharper interest rate than a 90% of 95% LVR Home Loan. This is due to the reduced risk from their perspective, with it being likely that if the property was sold the entire home loan can be cleared. As a result, lenders will offer a better interest rate for this type of lending.
A loan application that is 80% LVR or under will typically score better through bank application scorecard systems and be looked upon more favourably at credit assessment due to the lower risk. This can simplify the application and approval process and may also make the bank more likely to accept small issues with the application (like over drawings, one or two missed repayments etc.).
The sharper pricing on offer for 80% Home Loans can also assist with a higher borrowing capacity for your application. This is because the rate offered directly impacts the servicing capacity assessment the bank will conduct for your application. A lower rate = less interest + lower home loan repayments + a higher borrowing capacity!
Once you are under an 80% LVR you can look to refinance and move between lenders without incurring a new LMI premium. This frees you up to look at your options if you are unhappy with your current lender or your current offer is not competitive. Chat to our mortgage brokers to find out more!
There are far fewer restrictions on home lending options once your LVR is under 80%. However, your application will still be subject to standard home loan assessment criteria, including the below:
Even with a loan for under 80% of the property value, the lender you select will still complete a full assessment including an assessment of your capacity to repay the loan amount. This will look into your income, expenses, commitments and the proposed loan. The interest rate on the proposed loan is also typically buffered by 3.00%p.a. to make sure you can afford repayments if rates increase.
An 80% LVR is an excellent start for your application, however the bank must still validate your income, expenses, liabilities and account conduct and conduct a credit assessment for your application. For information on the full application process, click here.
As part of any home loan application, the lender will conduct a credit check on all applicants. This contains details on your repayment history and conduct, applications for credit, personal details, employment, directorships and more. If you have any negative conduct (missed repayments, defaults or judgements), please let your mortgage broker know. This should be addressed before we look to submit to any lender.
Knowing which lender to apply with is not always a simple matter of finding the sharpest interest rate. While this is important, it is equally as important to make sure you qualify with that lender and aren’t risking getting declined. With access to over 40 top home lenders, we are experts in credit policy and criteria across our panel and will match you with the right lender for your circumstances.
As with all home loan applications, there are certain documents and information that are required:
All home lenders are bound by legislation to properly identify all home loan applicants. Your mortgage broker will advise which ID documents are required as part of the home loan application process. Typically, a passport and driver’s licence is sufficient with nearly all lenders, although substitute documents are available.
Your mortgage broker and your chosen lender will require details on:
We will advise exactly what documents are required as part of your preliminary assessment and these can all be provided easily in our secure client portal.
If you are refinancing your property, we will organise a valuation on your existing home and if you are buying, we will organise an inspection of the property you are looking to purchase. These are typically free of charge unless we advise you of an associated cost from the lender.
Are you ready to get started with your 80% LVR home loan application? Contact us today to speak with an expert mortgage broker and book your no-obligation Preliminary Assessment.
Yes, it is! It is the LVR at which many lenders will compete more aggressively for your business as it is seen as a lower risk transaction. You have a significant amount of equity in your property, although accessing it through borrowing more funds can be tricky unless you are happy to pay LMI or sell the property.
This is one of the most significant benefits of reaching or surpassing the 80% LVR milestone. If you aren’t happy with your current lender, they aren’t offering a competitive interest rate or their credit policy does not match your scenario, you can look to refinance out and should be able to access another lender without an additional LMI cost.
In short- yes, you do. The amount you borrow and your LVR has no impact on how much stamp duty you pay when purchasing a property. This cost is typically paid to your state government. That being said, you may be able to access a stamp duty concession if you are buying your first home or looking to upgrade for owner occupied purposes.
In short, generally no. Most lenders will waive LMI at this LVR unless you are buying in a high risk, high density location, particularly if the property is a unit. If you have concerns here, please check with your mortgage broker and they will make sure this is the case.
