What is LVR? This is one of the most important questions to understand before you borrow. Your LVR can affect how much you borrow, your upfront costs and whether lenders mortgage insurance applies.
The good news is that the calculation is simple. This guide explains how LVR works, how lenders assess property value, why valuation matters, and how a high LVR can change your borrowing position.
Key Takeaways For LVR
| Key takeaway | What you need to know |
| What LVR means | LVR measures your loan as a percentage of the property’s value. |
| LVR formula | Loan amount ÷ property value × 100. |
| 80% LVR | This generally means you have 20% equity in the property at purchase. |
| Above 80% | Lenders mortgage insurance may apply, unless an exemption or government scheme applies. |
| 90% LVR | You generally need a 10% contribution towards the property’s value. |
| 95% LVR | You generally need a 5% contribution towards the property’s value. |
| Valuation matters | The lender may use its own valuation rather than the contract price. |
| Lower LVR | A lower ratio can reduce risk and may improve your lending options. |
| High LVR | A high ratio means you are borrowing more relative to the property’s value. |
| Government support | Eligible buyers may access the Australian Government 5% Deposit Scheme. |
What Does LVR Mean?
LVR stands for loan-to-value ratio.
It compares the amount you borrow with the value of the property securing the loan.
The basic formula is:
LVR = Loan amount ÷ Property value × 100
For example, assume a property is worth $800,000.
You contribute $160,000 towards the purchase.
You therefore borrow $640,000.
The calculation is:
$640,000 ÷ $800,000 × 100 = 80%
Your LVR is therefore 80%.
Why Does LVR Matter For My Home Loan?
LVR gives lenders a quick indication of how much property value supports your borrowing.
A lower LVR generally means you have more equity in the property. It also means the lender has a larger buffer if property values fall.
For you, the ratio can influence several parts of your application.
These include:
- the deposit you need
- potential lenders mortgage insurance
- lending policy
- available loan products
- borrowing limits
- government scheme eligibility
- your exposure if property values fall
However, LVR is only one part of a lending assessment.
Lenders also consider your income, expenses, debts, credit history and ability to service repayments.
APRA requires regulated lenders to apply a minimum 3 percentage point serviceability buffer when assessing new residential lending.
That means a low LVR does not automatically guarantee approval.
How To Calculate Your LVR
You can calculate LVR in three simple steps.
Step 1: Identify the loan amount
Start with the amount you intend to borrow.
For example:
- Property value: $700,000
- Deposit: $70,000
- Loan: $630,000
Step 2: Divide the loan by the property value
$630,000 ÷ $700,000 = 0.90
Step 3: Convert the result into a percentage
0.90 × 100 = 90%
Your LVR is 90%.
This means you are borrowing 90% of the property’s value.
You are contributing the remaining 10%.
LVR Examples At Different Deposit Levels
Your deposit and LVR move in opposite directions.
As your deposit increases, your LVR falls. Here is an example for an $800,000 property.
| Deposit | Loan | LVR |
| $40,000 | $760,000 | 95% |
| $80,000 | $720,000 | 90% |
| $120,000 | $680,000 | 85% |
| $160,000 | $640,000 | 80% |
| $200,000 | $600,000 | 75% |
| $240,000 | $560,000 | 70% |
This shows why saving a larger deposit can materially change your borrowing position.
However, you should not assume every lender will offer the same LVR.
Each lender has its own credit policies and property requirements.
What Is A Good Lvr For A Mortgage?
There is no single LVR that is best for everyone.
However, an LVR of 80% or lower is an important benchmark.
A lower LVR can mean lower costs and a better chance of approval.
An 80% LVR means you have 20% equity based on the property’s assessed value.
That can also help you avoid lenders mortgage insurance with many standard lending arrangements.
However, some borrowers deliberately choose a higher LVR.
They may prefer to retain cash rather than wait years to save a larger deposit.
That decision involves a trade-off.
You may enter the property market sooner.
However, you also borrow more relative to the property’s value.
LVR And Lenders Mortgage Insurance
Lenders mortgage insurance is commonly associated with higher LVR lending.
If your LVR exceeds 80%, your lender may require LMI. LMI protects the lender if you fail to repay the loan. It does not protect you.
The exact LMI cost depends on factors such as:
- your loan amount
- your LVR
- property value
- loan purpose
- lender policy
- borrower circumstances
LMI can sometimes be paid upfront.
Alternatively, the lender may allow it to be added to the loan.
Capitalising LMI can increase the amount you owe.
That can also affect the LVR calculation. Therefore, you should not assume that a 10% deposit automatically means your upfront costs stop at 10%.
You may still need money for stamp duty, conveyancing, inspections and other purchase costs.
Can You Get A Home Loan With A 95% Lvr?
Yes, some lenders may allow borrowing at a 95% LVR.
However, eligibility depends on the lender and your circumstances.
A 95% LVR means you contribute roughly 5% towards the property’s value.
For example:
| Property value | Deposit | Loan | LVR |
| $600,000 | $30,000 | $570,000 | 95% |
| $700,000 | $35,000 | $665,000 | 95% |
| $800,000 | $40,000 | $760,000 | 95% |
A 95% LVR leaves you with less equity at the beginning.
That increases your exposure to changes in property values.
It can also make valuation differences more important.
How the Australian Government 5% Deposit Scheme affects LVR
The Australian Government 5% Deposit Scheme can help eligible first home buyers purchase with a minimum 5% deposit.
The scheme provides a government guarantee to the participating lender.
Eligible first home buyers can therefore access lending with a high LVR without paying LMI under the scheme.
Since October 2025, the scheme has no income caps or waiting lists.
Property price caps still apply.
For example, the current caps include:
| State | Capital city | Other areas |
| NSW | $1,500,000 | $800,000 |
| VIC | $950,000 | $650,000 |
| QLD | $1,000,000 | $700,000 |
| WA | $850,000 | $600,000 |
| SA | $900,000 | $500,000 |
| TAS | $700,000 | $550,000 |
The scheme also applies to ACT and NT with separate caps.
Importantly, the scheme does not guarantee loan approval.
You still need to satisfy the participating lender’s lending criteria.
The government guarantee also does not mean the government makes your repayments.
You remain responsible for the entire loan.
What Happens If The Lender Values The Property Lower?
This is one of the most important LVR issues to understand.
The lender may arrange a property valuation before approving your loan.
The valuation can differ from the property’s purchase price.
For example, suppose you agree to pay $700,000.
The lender’s valuation comes back at $680,000.
The lender may assess your LVR against $680,000.
If you borrow $646,000, the calculation becomes:
$646,000 ÷ $680,000 × 100 = 95%
You might have expected an LVR of about 92.3% based on the purchase price.
The lender’s valuation produces a higher LVR.
That difference can affect the amount you need to contribute.
It can also affect LMI and whether the proposed loan fits lending policy.
The Australian Government 5% Deposit Scheme specifically warns that the property value assessed by the participating lender can differ from the purchase price.
Why Property Valuation Matters To Lvr
A valuation gives the lender an independent assessment of the property’s value.
Lenders use valuations when determining how much they are prepared to lend against the property.
Valuation is particularly important when the market is changing.
Property values can move between the time you negotiate a purchase and settlement.
Cotality provides property indices designed to track changes in Australian residential property values.
Its data is used across lending, government, valuation and property research.
These market indicators provide useful context.
However, they do not replace the valuation ordered by your lender.
What Happens To Your LVR When Property Prices Rise?
Your LVR can fall even if you do not make additional repayments.
This can happen when the property’s value increases.
For example, assume:
- Original property value: $600,000
- Original loan: $480,000
- Original LVR: 80%
You later owe $460,000.
If the property is then valued at $650,000, your new LVR becomes:
$460,000 ÷ $650,000 × 100 = 70.8%
Your loan balance has fallen.
Your property value has also increased.
Both changes reduce your LVR.
This can increase your equity.
However, property prices do not always rise.
You should never base your borrowing decision on an assumption of future capital growth.
What Happens To Your Lvr If Property Prices Fall?
The opposite can happen during a property downturn.
Suppose you owe $570,000 on a property originally valued at $600,000.
Your starting LVR is 95%.
The property’s value then falls to $550,000.
Your LVR becomes:
$570,000 ÷ $550,000 × 100 = 103.6%
You would have negative equity based on that simple calculation.
This means your loan balance exceeds the property’s assessed value.
Negative equity does not automatically mean you must sell.
However, it can make refinancing or selling more difficult.
The RBA continues to monitor high-LVR borrowers because they can be more vulnerable to financial stress.
What Is The Difference Between Lvr And Equity?
LVR and equity describe related but different concepts.
Your equity is the portion of the property you effectively own.
Your LVR measures the portion funded by borrowing.
For example:
- Property value: $800,000
- Loan balance: $600,000
- Equity: $200,000
- LVR: 75%
Your equity is $200,000.
Your LVR is 75%.
As you repay your loan, your equity generally increases.
Equity can also increase if the property’s value rises.
However, falling property values can reduce your equity.
Lvr Versus Deposit Percentage
Your deposit percentage and starting LVR are closely connected.
The relationship is: Deposit percentage + LVR = 100%
If you contribute 20% of the property’s value, the starting LVR is generally 80%.
If you contribute 10%, the starting LVR is generally 90%.
If you contribute 5%, the starting LVR is generally 95%.
This simple relationship applies when the deposit represents the difference between the loan and property value.
Additional costs can make the cash you need higher than the deposit percentage.
Does Lvr Affect Borrowing Capacity?
LVR and borrowing capacity are not the same thing.
LVR focuses on the property securing the loan.
Borrowing capacity focuses heavily on whether you can afford the repayments.
A lender may therefore decline an application with a low LVR.
For example, you might have a large deposit but insufficient income for the requested repayments.
The reverse can also happen.
You might have strong income but a small deposit.
Your application could then involve a higher LVR.
Lenders assess the complete application rather than looking at the deposit alone.
Lvr And First Home Buyers
LVR is particularly important when you are saving your first deposit.
A smaller deposit creates a higher starting LVR.
That can allow earlier entry into the property market.
However, it also means you begin with less equity.
Government schemes can change the cost of high-LVR borrowing for eligible applicants.
For example, the 5% Deposit Scheme allows eligible first home buyers to use a minimum 5% deposit without LMI under the scheme.
You still need to consider:
- purchase costs
- repayments
- interest rate changes
- property valuation
- lender policy
- future income changes
- property market movements
The cheapest path is not necessarily the path with the smallest deposit.
Lvr When Refinancing
LVR can also matter when you refinance an existing mortgage.
Your lender may assess the current property value.
It may then compare that value with your outstanding loan.
For example:
- Property value: $900,000
- Outstanding loan: $540,000
- Current LVR: 60%
A 60% LVR may place you in a different pricing or lending category than a borrower with a much higher ratio.
However, lender policies differ.
Your income, debts, repayment history and expenses can still affect the refinancing assessment.
A valuation can also change the result.
Can You Reduce Your Lvr?
You generally have several ways to reduce your LVR.
| Strategy | How It Can Help Lower Your LVR | Important Consideration |
| Make additional repayments | Extra repayments can reduce your loan balance and gradually lower your LVR. | Check whether your loan allows additional repayments without restrictions. |
| Build more equity | Property value growth can increase your equity and reduce your LVR. | Property growth is not guaranteed. Market conditions vary between suburbs, cities and property types. |
| Use savings for a larger deposit | A larger deposit reduces the amount you need to borrow and lowers your starting LVR. | Keep enough cash for purchase costs and an appropriate financial buffer. |
| Consider refinancing later | A lower LVR may give you more refinancing options. | Compare the total cost, not just the interest rate. The new lender will still assess your circumstances. |
Is A Lower Lvr Always Better?
Not necessarily.
A lower LVR generally means less borrowing relative to the property’s value.
That can reduce financial risk.
However, using every available dollar for your deposit can leave you with little cash.
You may then have less money available for:
- moving expenses
- repairs
- renovations
- emergencies
- rate increases
- unexpected bills
A higher LVR can preserve cash reserves.
However, it usually means greater debt and potentially higher costs.
The right balance depends on your financial position and risk tolerance.
Common Lvr Mistakes To Avoid
| Mistake | Why It Matters |
| Confusing purchase price with property value | The lender’s valuation may differ from the contract price. This difference can change your LVR. |
| Assuming 80% LVR guarantees approval | LVR is only one part of the lending assessment. Your income and expenses still matter. |
| Forgetting LMI | A deposit below 20% can result in LMI under standard lending. High-LVR arrangements may have different requirements. |
| Spending every dollar on the deposit | Your deposit is not your only purchase expense. Allow for other costs and maintain a financial buffer. |
| Assuming property prices will rise | Future growth is uncertain. Your borrowing decision should remain affordable if property values fall. |
| Ignoring the lender’s valuation | The valuation can materially affect a high-LVR purchase. This is especially important when you have limited savings. |
What Lvr Should You Aim For When Buying A House In Australia?
An 80% LVR is a useful benchmark.
It generally represents a 20% contribution towards the property’s value.
However, you should not treat 80% as a universal rule.
A higher LVR may make sense when you qualify for a government scheme or have strong reasons to preserve savings.
A lower LVR may make sense if reducing debt is your priority.
The important question is not simply:
“What is the lowest LVR I can achieve?”
Instead, consider:
“What LVR gives me a manageable loan while leaving enough cash for unexpected costs?”
That is a much more useful question for your long-term finances.
Conclusion
LVR is one of the clearest ways to understand how much debt you are taking against a property.
A lower ratio generally means more equity and less borrowing risk.
A higher ratio can reduce the deposit needed, but it can also increase your financial exposure.
The most important lesson is simple.
Your LVR is not just a percentage on a lender’s paperwork.
It shows how heavily you are relying on borrowed money to own your property.
Understanding that number helps you compare deposit sizes, assess LMI, understand valuations and make more informed borrowing decisions.
Before Buying a house, consider the full cost of the purchase.
Your deposit, LVR, repayments, other purchase costs and financial buffer all matter.
For personalised financial advice, consider speaking with an appropriately licensed professional.
Lvr Frequently Asked Questions
1. What is LVR in a home loan?
LVR measures your loan as a percentage of the property’s assessed value.
You calculate it by dividing the loan amount by the property value.
Then multiply the result by 100.
2. Is 80% LVR good?
An 80% LVR is a common benchmark because it means you have 20% equity based on the property’s value.
It can also help you avoid LMI with many standard lending arrangements.
However, individual lender policies differ.
3. Is 90% LVR too high?
A 90% LVR is not automatically too high.
It means you are borrowing 90% of the property’s value.
However, higher LVR lending generally leaves you with less equity.
LMI may also apply unless an exemption or government scheme is available.
4. Can I borrow at 95% LVR?
Some lenders offer lending at 95% LVR.
Eligible first home buyers may also access the Australian Government 5% Deposit Scheme.
The scheme can provide government backing and remove LMI under its eligibility rules.
5. Does LVR include LMI?
It can, depending on how the LMI premium is treated.
If LMI is added to the loan, the resulting loan balance can increase.
APRA’s LMI framework specifically recognises the effect of capitalised premiums when calculating LVR.
6. Does LVR affect my interest rate?
Possibly.
Some lenders price loans differently depending on LVR.
Higher LVR lending can represent greater risk for the lender.
However, pricing depends on the lender, product and borrower circumstances.
7. Can my LVR change after I buy?
Yes.
Your LVR can change as your loan balance changes.
It can also change when your property’s assessed value changes.
Your LVR may therefore fall without you making extra repayments if the property value increases.
8. What happens if my property valuation is lower than the purchase price?
Your LVR may be higher than expected.
The lender may base its lending decision on its assessed property value.
You may then need to contribute more money to complete the purchase.
General information only. This article does not consider your personal financial circumstances, objectives or needs. Lending criteria, government scheme rules, property valuations and costs can change. Check current requirements with the relevant lender and government authority before making a financial decision.
