Compare High Equity Home Loans

What is a High Equity Mortgage?

A high-equity mortgage is a type of home loan with a maximum loan to value ratio (LVR) or 80%. This means the lender will only allow you to borrow up to 80% of the home value; the other 20% (or more) will need to be contributed by you.

Essentially a high equity mortgage (or high deposit mortgage) is a regular home loan for anyone with a high deposit.

Benefits of a High Equity Mortgage

When you have a high deposit for a property, you’ll often have access to some benefits:

Lower interest rates than low deposit loans. Lenders are often happy to provide finance at a lower interest rate because they see it as lower risk when the LVR is low.
Lower regular repayments. With a higher deposit, the loan amount is lower, naturally meaning your repayments are lower than if you borrowed a higher sum.
No lenders mortgage insurance (LMI). When borrowers have a deposit of less than 20%, they are required to pay for LMI to cover the lenders risk. LMI can be thousands of dollars.

How Does a High Equity Loan Work?

Consider the following example:

Sarah would like to purchase a house and has saved a $150,000 deposit. To qualify for a high equity loan, the deposit amount needs to be 20% or higher of the property’s value. This means Sarah can access a high equity loan for properties up to $750,000.

$150,000 deposit for a $750,000 home is 20%. If Sarah wanted an even lower LVR, a $500,000 property would mean her deposit is 30% of the value.

Who Can Qualify for a High Equity Mortgage?

Qualifying for a loan is always subject to the lenders specific criteria, however, generally speaking, anyone with a deposit higher than 20% of the property value can access a high equity mortgage.

What are the Downsides of Using High Equity Mortgages?

Tying money up in home equity. When you deposit a large amount of your money, you need to be aware that it will be harder to access if you need to use it in the future. Refinancing to release equity will be necessary.
Missed opportunities. With your money tied up in your home, you will be unable to use it for other purposes. This could include holidays or even money making opportunities such as other investments. Is the interest you’re saving by having a large deposit larger than the return you could generate if you’d invested the money elsewhere?

Tips to Increase Equity in Your Home

Once you’ve purchased a home with a large deposit, there are steps you can take to further increase your equity. Here’s what you can do to speed things up:

Make extra repayments

Even if you can only afford to pay an extra $50 or $100 per month, paying extra towards your mortgage is the most effective way to increase your equity —  even small amounts add up over time.

Make a lump-sum payment

By making a lump-sum payment on your mortgage you can reduce the principal balance of your loan and boost your equity.

Invest in home improvements

Strategic renovations, like updating the kitchen or bathroom, can increase the value of your home.

Take good care of your home

Regular maintenance and repairs can help to maintain the value of your home.