3 Ways to Improve Your Loan-to-Value Ratio (LVR) Pre-Refinance

In today’s ever changing housing market, understanding how to optimise your loan to value ratio (LVR) can be the difference between securing favourable refinancing terms, or unfortunately, having to sit and wait.

Below we’re going to focus on specific strategies designed to help you improve your LVR.

Why does Improving Your LVR Matter?

A lower LVR doesn’t just increase your approval chances, it helps unlock access to better interest rates for your home loan refinance, more flexible loan features, and the potential to reduce or even waive your lenders mortgage insurance (LMI). If you were to see even a 5% improvement in your LVR you could potentially save thousands of dollars over the life of your loan.

Effective Strategies to Lower your LVR:

Now that we have established why LVR matters, here are three areas that can help effectively lower your LVR:

1.    Enhancing Your Property:

• Return on Investment (ROI) Improvements: Kitchen and bathroom renovations typically deliver a high return on your investment. Consider mid-range updates rather than one big update as it will be the best value to cost ratio.
• Energy Efficient Upgrades: Installing solar panels, improving insulation, or having energy efficient appliances not only help in reducing costs but they add significant property value due to it becoming more important to buyers and valuers.
• Pre-Valuation Preparation: Before you have an evaluation whether from a bank or an independent valuer, ensure your property is being presented at its best. Look to address minor repairs, refresh paint if needed, and improve curb appeal. Remember first impressions matter in valuations.

2.    Optimising Your Mortgage Repayments:

• Change Repayment Schedule: Rather than having monthly repayments, if you have the budget look to change your repayment schedule to every fortnight or even weekly as this can result in an extra full payment annually which will lower your debts faster.
• Offset Account: Look to direct your income into an offset account before paying expenses as this can save considerable interest over time, effectively reducing your principal faster.
• Allocating Extra Income: Rather than spending your tax returns, work bonuses, or inheritance funds if you receive that, look to allocate a portion of it to your mortgage to help reduce your loan balance.

3.    Consolidating Your Debt:

• Prioritise High Interest Debt: Look to eliminate high interest debts as this will impact your borrowing capacity the most.
• Partial Consolidation: Depending on your specific situation, sometimes it can be beneficial to only consolidate certain debts rather than all debts.
• Post Consolidation Plan: To keep yourself from following into the same cycle of getting a lot of debt and having to consolidate, look to create a clear plan establishing boundaries for yourself so you don’t get stuck in the cycle of debt again.

You can also look to use other strategies to help lower your LVR, such as bringing a guarantor on who helps add strength to your application with their financial stability and additional equity contribution. Also, stay on top of the market trends, and this is where we can certainly help with our informative blog content.

If you do need assistance in how to get your debt under control, Moneysmart has an article ‘Get Debt Under Control’ where they provide 6 easy steps to help get back on track.

Master the LVR Secret That Lenders Don’t Tell You:

Want to understand the fundamentals of LVR? Check our comprehensive guide ‘Understanding Loan-to-Value Ratio (LVR) and Home Refinancing’ to learn all the ins and outs of LVR.

Need assistance? Give our friendly team a ring