Mozo guides

Can a larger home loan deposit help you save money?

By Polly Fleeting and Maria Gil
Fact Checked
Advertiser disclosure

On this page:

man-working-out-lvr-on-home-loan

For many of us, savings for a home deposit is no easy feat. In fact, it can take a number of years of putting away money and budgeting to get there. 

The truth is, you can take out a home loan with a deposit of as little as 5%. However, it generally comes with extra costs and could end up leaving you more out of pocket over the life of the loan. 

That’s why saving up more for a deposit of 20% of the property value (or more) is actually more likely to save you money in the long run. 

Here’s how: 

Simply put, the more you save as a home deposit the less you will have to borrow to buy a property. It ultimately reduces the percentage of the property value you pay interest on. 

For home loan customers with a 20% deposit, or 80% Loan to Value Ratio (LVR), lenders won’t charge Lenders Mortgage Insurance (LMI) and may offer more competitive interest rates. 

The more money you have for a deposit, the easier it is to prove that you have the necessary savings. That way when it comes time to be approved for a loan, you have more chance of being given the green light. 

What's a Loan to Value Ratio again? 

Your Loan to Value Ratio (LVR) refers to the amount you are borrowing from the bank in relation to the value of the property you intend to buy. So, it’s the value of the property minus the deposit you’ve saved.  

Take this for example. Say you saved up a 20% deposit, you would need to borrow 80% of the property value from the bank. Therefore, your LVR would be 80%.  

Similarly, if you had a smaller 10% deposit, your LVR would be 90% or if you had a larger 30% deposit your LVR would be 70%. 

Ultimately, the larger your deposit on a particular property, the lower your LVR.  So when you are figuring out how much you can borrow aim for having low LVRs.

So what are the benefits of a lower LVR? 

two women looking at home loans lvr

There are two main benefits of having an 80% LVR or less: no LMI and lower interest rates. 

LMI is a type of insurance that lenders take out in order to protect themselves in case a borrower with a small deposit (under 20%) defaults on their loan. This insurance is not designed to cover the borrower, however it is the borrower who is charged for this cost. It often adds up to around 2% of the value of the loan - so the bigger the loan the more you pay in LMI. 

However, for borrowers who have a deposit of 20% of more, you are not required to pay LMI as you are viewed as a less risky borrower. So if you took out a $600,000 loan with a 20% deposit, you could end up saving around $12,000 in LMI costs. 

And what about lower interest rates? Well, a bunch of lenders offer more competitive rates to borrowers who have a 80% LVR or lower. Over the life of a 30-year home loan, a lower rate could end up saving you thousands of dollars in interest repayments. 

Already have a deposit saved up and want to start comparing mortgage options? Check out some hot deals below or jump over to our home loans hub for more!

Compare Home Loans - last updated 25 April 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
  • Featured Product
    Mozo Expert Choice Badge
    Unloan Variable

    Owner Occupier, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    5.99% p.a. variable
    5.90% p.a.

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

    Compare
    Go to site
    Details
  • Mozo Expert Choice Badge
    Express Home Loan

    Owner Occupier, Principal & Interest, LVR <90%

    interest rate
    comparison rate
    Initial monthly repayment
    6.01% p.a. variable
    6.14% p.a.

    Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

    Compare
    Go to site
    Details
  • Discounted Home Value Loan

    Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.09% p.a. variable
    6.09% p.a.

    Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).

    Compare
    Details
  • Basic Home Loan

    Fixed, Investment, Interest Only, LVR <70%

    interest rate
    comparison rate
    Initial monthly repayment
    6.49% p.a.
    fixed 2 years
    6.56% p.a.

    Compare
    Go to site
    Details
  • Featured Product
    Mozo Expert Choice Badge
    Unloan Variable

    Investment, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.29% p.a. variable
    6.20% p.a.

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for investors. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

    Compare
    Go to site
    Details
  • Fixed Rate

    Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    6.54% p.a.
    fixed 2 years
    7.10% p.a.

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

    Compare
    Details
Polly Fleeting
Polly Fleeting
Money writer

Polly is a personal finance writer specialising in loans and credit cards and general consumer banking. She has a degree in Journalism from the University of Technology, Sydney.

Maria Gil
Maria Gil
Money writer

Maria has five years of journalism experience and is currently a finance journalist covering home loans and property, personal finance and the currency exchange market. She has also completed her ASIC RG146 (Tier 2).

* 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.