Loan to value ratio (LVR) explained

Work out your own LVR

The LVR calculator linked below takes a property value and either the loan amount or the deposit, returns the ratio, shows whether lenders mortgage insurance applies, and states how much further deposit would reach 80 per cent.

What is a loan to value ratio?

Your loan to value ratio is the loan amount divided by the property's value, expressed as a percentage. Borrow $600,000 against a $750,000 property and the LVR is 80%. Lenders use it to price the loan, to decide whether lenders mortgage insurance applies, and to decide whether they will lend at all.

Your deposit is the other side of the same number. A 20% deposit is an 80% LVR, a 10% deposit is a 90% LVR. Most of the cost differences borrowers notice between deposit sizes are really LVR differences.

How do you calculate LVR?

Divide the loan amount by the property value, then multiply by 100. ASIC MoneySmart uses the same arithmetic: borrow $450,000 to buy a $600,000 home and the LVR is 75%.

The catch is which value goes in the denominator. Lenders use their own valuation, and where the valuation and the purchase price differ they use the lower of the two. That protects the lender from a buyer overpaying, and it is why a valuation that comes in short can push a loan over an LVR threshold that looked comfortable on the contract price.

Worked example: a valuation of $580,000 on a $600,000 contract turns a planned 90% LVR into roughly 93%, because the loan stays at $540,000 while the denominator falls. That one movement can change the premium band and the pricing tier at the same time.

Why does the 80% LVR threshold matter?

80% is the line almost every Australian lender draws, and three separate things change when you cross it. First, lenders mortgage insurance normally applies. ASIC MoneySmart states that if your LVR is above 80%, you may need to pay lenders mortgage insurance, a one-off fee that protects the lender rather than you or your guarantor. Second, most lenders publish a sharper pricing tier at or under 80% LVR, so the same borrower on the same product can be quoted differently either side of the line. Third, the range of lenders and products willing to look at the file narrows as the LVR climbs.

The size of the pricing gap between tiers is not fixed. Lenders reprice tiers independently and the gap widens and narrows over time, so compare current rows at the same purpose, repayment type and rate type rather than assuming a historical difference still holds.

What LVR will lenders accept?

Every lender publishes a maximum, and the bands below are the ones most policies are built around. Where you sit changes the premium, the pricing tier, and how many lenders are open to you.

• 60% LVR or below. The narrowest pricing most lenders publish, and the band that opens up specialist and low-doc products. It requires a deposit or equity of 40% or more.
• 70% LVR or below. Second tier pricing on most variable products, and the usual ceiling for alternative-documentation and some investment lending.
• 80% LVR or below. The no-LMI band, the widest product range, and the tier most advertised pricing is quoted at.
• 80% to 90% LVR. LMI applies and the pricing tier is usually a notch higher. Product choice starts to narrow.
• 90% to 95% LVR. LMI is at its most expensive, only some lenders accept the band, and a few require the premium in cash rather than capitalised.
• Above 95% LVR. Only through the Australian Government 5% Deposit Scheme, a family guarantee, or capitalising the premium on top of a 95% loan where the lender allows it.

How can I get my LVR under 80%?

Saving the difference is the obvious route and often the slowest. Three others change the number without changing your savings balance.

• A family guarantee. A relative's property equity is taken as additional security so the bank loan sits at or under 80% of the combined security. No premium is charged, and the guarantee can usually be released later once the loan sits under 80% of your own property's value.
• The Australian Government 5% Deposit Scheme. It does not lower your LVR, it removes the LMI that a high LVR would normally trigger. From 1 October 2025 the scheme has no income caps, no waitlists and no lenders mortgage insurance, with a minimum 5% deposit for eligible first home buyers and a minimum 2% for eligible single parents and single legal guardians. Price caps apply by location and applications go through a participating lender.
• Buying at a lower price. Dropping the purchase price lifts your deposit as a percentage of it, and the effect is larger than most buyers expect near a band edge.
• A stronger valuation on a refinance. LVR moves as the property value moves, so on a refinance an up-to-date valuation can take an existing loan under the line without a dollar of extra deposit.

Does my LVR change over time?

Yes, in both directions. Principal and interest repayments shrink the loan while the property's value moves independently, so an LVR set at 90% at settlement can be well under 80% some years later, or higher if the value has fallen. Interest-only repayments leave the loan balance still, so only the valuation moves the number.

The moment it matters again is a refinance, a top-up, or a request to release a guarantor. Each one triggers a fresh valuation and a fresh LVR calculation, and each is a chance to land in a narrower pricing tier or to step out of LMI territory. Working out where you sit today takes two figures: the current loan balance and a realistic value. The repayment calculator shows how fast the balance falls, and the borrowing power calculator shows what a lender would approve against it.

LVR questions people ask

The answers below are general information about how LVR is normally treated in Australia. Individual lender policies differ, so confirm your own position with the lender before acting on any of it.

What is a good LVR?

For most borrowers, 80% or under, because that is where lenders mortgage insurance stops applying and the widest range of products opens up. Lower still narrows the pricing further at most lenders. The right target is not automatically the smallest number though: the cost of waiting to reach it can outweigh the premium it avoids, which is the comparison the LMI guide sets out.

Is LVR based on the purchase price or the valuation?

The lower of the two. If the lender's valuation comes in below the contract price, the valuation is used, so the LVR rises and the deposit has to stretch further. If the valuation comes in above the contract price, the price is used, so a bargain purchase does not lower your LVR at the point of buying. On a refinance there is no purchase price, so the valuation alone sets the number.

What LVR do I need to avoid LMI?

80% or below at almost every Australian lender. Above that, the premium applies unless the Australian Government 5% Deposit Scheme, a family guarantee, or a lender's profession-based waiver removes it. The LMI guide sets out the current terms and gates on each of those routes.

Can I borrow at 95% LVR?

Some lenders accept it, and it is the usual floor for mainstream lending. LMI applies at its steepest band, the pricing tier is normally higher, and fewer lenders are open to the file. Eligible first home buyers can reach the same 95% position through the Australian Government 5% Deposit Scheme without the premium. Compare what is available at that band on the low deposit page.

This information is general only and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you before acting on it.