How Your Deposit Size Can Lower Your Interest Rate in 2025
A Bigger Deposit Doesn’t Just Shrink Your Loan—It Could Shrink Your Rate Too
It’s no secret that the more you save for a deposit, the smaller your home loan—and the lower your monthly repayments. But did you know that a larger deposit could also help you score a lower interest rate?
At CBM Mortgages, we’re often asked: “How can I get a better rate?” While there’s no one-size-fits-all answer, one key factor is your Loan-to-Value Ratio (LVR)—and that’s where your deposit size comes in.
What Is LVR and Why Does It Matter?
Understanding Loan-to-Value Ratio
Your LVR is the percentage of the property’s value that you’re borrowing. For example:
- Property price: $600,000
- Deposit: $120,000
- Loan amount: $480,000
- LVR: 80%
The lower your LVR, the less risk you pose to the lender—and the more likely you are to be rewarded with a lower interest rate.
How Deposit Size Affects Interest Rates in 2025
Banks generally provide interest rates based on risk, so the lower your lender will go when your mortgage broker is negotiating interest rates for you. The banks normally put the lending to value risk in brackets and that can be for loans above a 90% Lending to value ratio (LVR) between 80-90%, below 80% LVR and then below 60% LVR providing the best rates.
Other Ways a Lower LVR Can Save You Money
Avoiding Lenders Mortgage Insurance (LMI)
If your deposit is less than 20%, you may be required to pay Lenders Mortgage Insurance (LMI)—a one-off cost that protects the lender, not you.
But there’s good news: eligible first-home buyers can avoid LMI through the First Home Guarantee Scheme, which allows you to buy with just a 5% deposit and no LMI.
What If You’re Refinancing?
Equity = Lower LVR
When refinancing, your LVR is based on your home equity. The more equity you’ve built, the lower your LVR—and the better your chances of securing a competitive rate.
Looking for a Mortgage Broker to help with the process? Click here to see why most people use a broker instead of a bank
Let’s Find the Right Loan for Your LVR
With hundreds of loan products on the market, finding the right one can be overwhelming. That’s where we come in.
At CBM Mortgages, we help you:
- Understand your borrowing power
- Compare rates based on your LVR
- Navigate government schemes and LMI exemptions
- Secure a loan that suits your goals—whether you’re buying your first home, upgrading, or refinancing
Call us today on 02 8068 0534 or get in touch online to get started.
Further Reading:
- First Home Buyer Grants – Revenue NSW
- Interest Rates 2025 – Cockatoo
- When should I contact a Mortgage Broker
- Looking for a Mortgage Broker in Balmain
Disclaimer:
The information provided in this article is for general guidance only and does not constitute financial or tax advice. It does not consider your personal circumstances. Before making any financial decisions, seek professional advice from a licensed mortgage broker or financial consultant. This content is protected by copyright laws and may not be modified, reproduced, or republished without prior written consent.
Written by Craig McDonald 15/06/2025
