What is LVR (Loan-to-Value Ratio)?

How to calculate your LVR

Divide the loan amount by the property value and multiply by 100. A $600,000 home with a $480,000 loan has an LVR of 80%. With a $540,000 loan on the same home, the LVR is 90%. Your deposit and your LVR are two sides of the same number: a 20% deposit gives an 80% LVR, and a 10% deposit gives a 90% LVR.

The value used is the lender's valuation, which is not always the price you pay. Most lenders work off the lower of the purchase price and their own valuation. If you agree to pay $620,000 and the valuer puts the home at $600,000, the lender uses $600,000, and your deposit has to cover the $20,000 gap to keep the same LVR. This is one reason a valuation matters so much, especially when you are buying at auction.

LVR is worked out on every loan secured by the property, not just the main home loan. If you later add a top-up or a second loan against the same home, the lender adds the balances together before comparing them with the value.

Why 80% is the number that matters

Above 80% LVR, most lenders require lenders mortgage insurance (LMI). LMI protects the lender, not you, if the loan defaults and the sale of the property does not cover the debt. The premium is usually a one-off cost that rises as the LVR goes up, and it can often be added to the loan, which pushes the LVR up a little further.

Eligible first home buyers can avoid LMI with a deposit as small as 5% through the Australian Government 5% Deposit Scheme. Since 1 October 2025 the scheme has no income caps and no limit on places. In South Australia the property price cap is $900,000 in Adelaide and $500,000 elsewhere in SA. Some lenders also waive LMI for certain professions, and a family guarantee can reduce the LVR the lender relies on.

How LVR affects your rate and your options

Many lenders price their loans in LVR bands, with sharper rates at lower LVRs because the lender is taking less risk. Moving from just over 80% to just under it can change both the LMI cost and the rate on offer. As you pay the loan down and the property grows in value, your LVR falls, which can open up better pricing when you refinance or ask your lender for a rate review.

LVR also limits what you can do. Fewer lenders accept loans above 90% LVR and their criteria are tighter, while investment loans, alt doc loans for the self-employed and some property types often have lower maximum LVRs. LVR is only one part of the assessment. Lenders still look at your income, expenses and debts, and APRA expects banks to test your repayments at a rate at least 3 percentage points above the loan rate.

LVR when you refinance or use equity

When you refinance, the new lender values the property again and works out a fresh LVR on your current balance. If you are above 80% and switch lenders, you may have to pay LMI again, because the cover does not move with you to a new lender. Check this before you move a high LVR loan for a small rate saving.

Equity is the other side of LVR. If your home is worth $700,000 and you owe $400,000, your LVR is about 57%. Many lenders will lend up to 80% of the value without LMI, which in this example is $560,000. That leaves up to $160,000 of usable equity, provided your income supports the larger loan.

Frequently asked questions

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