Value growth can access better home loan rates

If you’re in one of these 88 regions in Australia, your home value growth over the last year has unlocked huge future savings.

Townsville home owners may be best placed to unlock big mortgage savings.

ANALYSIS

When you apply for a home loan, there are various factors that will determine what interest rate lenders may offer you. One factor you might be able to leverage to negotiate your rate is your property value. As property values climb to new record highs, an increasing number of borrowers may be able to use their property value and loan-to-value ratio (LVR) to get a better deal on their home loan.

The latest PropTrack Home Price data reveals there are 88 regions around the country where property prices have risen over the last year.

The top five regions for annual growth nationally are:

Townsville – 18.70 per cent

Western Australia - Wheat Belt – 15.89 per cent

Mackay - Isaac – Whitsunday – 14.98 per cent

Central Queensland – 14.72 per cent

Barossa - Yorke - Mid North – 14.39 per cent

Anthony Waldron, CEO of Mortgage Choice.

How does LVR work?

Your LVR represents the debt owed on a property compared to the value of the property.

If you’ve been paying down your home loan – especially in an area where property prices have risen – your LVR has likely lowered, and you might be able to use your new LVR to negotiate a better interest rate.

When you work with a mortgage broker to access a more competitive home loan interest rate, the broker will compare what’s on offer with different lenders. Given different lenders may value the same property at a different amount, this can lead to real savings for borrowers.

For example, with a loan size of $550,000:

Lender A values your property at $610,000 (90.16 per cent LVR)

Lender offers you a 6 per cent p.a variable rate

Lender B values your property at $650,000 (84.62 per cent LVR)

Lender offers you a 5.84 per cent p.a variable rate

Lender C values your property at $696,202 (79 per cent LVR)

Lender offers you a 5.49 per cent p.a variable rate

That’s a difference of $2136 a year in home loan repayments between lender A and lender C. his translates to about $64,000 over the life of the loan.

Property values have been flying high in the Barossa Valley area. Picture: Morgan Hancock

So, how do I know if my LVR has changed?

In addition to making a dent on your loan, if you’ve made home improvements or renovations, or your property is in a high-growth region, you may have moved into a new LVR tier.

A mortgage broker can help you take all these factors into account to calculate your current LVR and compare your current home loan against what’s in market to see if you can access a more competitive home loan interest rate.

Top growth per region

The latest PropTrack Home Price data reveals the regions where property prices have risen over the last year.

NSW:

Far West and Orana – 10.08 per cent

Hunter Valley exc Newcastle – 7.20 per cent

Murray – 6.91 per cent

New England and North West – 6.17 per cent

Sydney - South West – 5.72 per cent

QLD:

Townsville – 18.70 per cent

Mackay, Isaac, Whitsunday – 15.89 per cent

Central Queensland – 14.98 per cent

Toowoomba – 13.01 per cent

Ipswich – 11.36 per cent

SA:

Barossa - Yorke - Mid North – 14.39 per cent

South Australia – Outback – 12.65 per cent

South Australia - South East – 12.18 per cent

Adelaide – North – 11.30 per cent

Adelaide – South – 10.93 per cent

VIC:

Bendigo – 3.14 per cent

Ballarat – 3.10 per cent

Shepparton – 2.87 per cent

Melbourne – North West – 2.67 per cent

Warrnambool and South West – 2.35 per cent

TAS:

Hobart – 2.34 per cent

Anthony Waldron is Mortgage Choice CEO.

Originally published as Value growth can access better home loan rates