Strategy · September 2026 · 7 min read
LVR is the percentage of a property's value that you are borrowing. The formula is simple, but the value a lender uses, the costs outside the deposit and the policy attached to each LVR band are where it gets important.
Photo: Matt Stone, CC BY-SA 4.0 via Wikimedia Commons
LVR is one of those terms people hear all the way through a home loan application without anyone stopping to explain it properly.
It stands for loan to value ratio. In plain English, it tells a lender how much of the property's value you want it to fund and how much of that value sits outside the loan.
The calculation takes less than a minute. What the answer changes can affect your lender options, interest rate, lenders mortgage insurance and the amount of cash you need before settlement.
The LVR formula
× 100 = 80% LVR
Divide the loan amount by the property value, then multiply the result by 100.
Worked example
That loan has an 80 percent LVR. Looked at from the other side, the $160,000 difference represents 20 percent of the property value. That does not automatically mean the buyer only needs $160,000 in cash, because purchase costs sit outside this basic calculation.
On a purchase, lenders generally calculate LVR using the lower of the purchase price and their accepted valuation. That distinction matters when the valuer and the contract disagree.
Say you agree to pay $800,000 and want a $720,000 loan. If the lender accepts the property at $800,000, the LVR is 90 percent.
If the lender's valuation comes back at $760,000, it does not keep calculating against the higher contract price. The same $720,000 loan divided by $760,000 produces an LVR of about 94.7 percent.
A lower valuation can increase your LVR without changing the price or the loan you asked for.
That can mean contributing more cash, reducing the loan, reconsidering the property or moving to a lender whose valuation and policy support the purchase. A valuation is not a promise about what the property will sell for later. It is the lender's assessment of the security it is being asked to accept now.
Lenders do not all draw their lines in exactly the same place, but these are useful reference points for a standard residential loan.
| LVR | What it usually means | What to check |
|---|---|---|
| 80% or less | Commonly avoids lenders mortgage insurance. | Rate, features, servicing and property policy still apply. |
| Above 80% | Lenders mortgage insurance may apply unless an eligible guarantee or professional policy is available. | Premium, maximum LVR and genuine savings rules. |
| 90% and above | The lender is funding a larger share of the value. | Fewer lender options and tighter postcode or property rules can apply. |
An 80 percent LVR is not an approval guarantee and a higher LVR is not an automatic decline. LVR measures the loan against the security. Borrowing capacity measures whether the lender believes you can afford the repayments. Credit history, income, expenses, loan purpose and the property itself are assessed separately.
Lenders mortgage insurance, usually shortened to LMI, may be required when an LVR is above 80 percent. It protects the lender, not the borrower, if the property is sold after default and the sale proceeds do not clear the debt.
The premium is not a flat percentage. It can vary with the lender, insurer, loan amount, LVR, property and borrower profile. Some lenders allow the premium to be added to the loan, subject to their maximum LVR. If it is capitalised, the final loan and final LVR can be higher than the initial calculation.
Avoiding LMI can be useful, but waiting to reach a 20 percent deposit is not automatically the best decision for everyone. Eligible buyers may have access to a government guarantee, a limited family guarantee or a lender policy that changes the outcome. Each option has rules and risks that need to be understood rather than assumed.
A 10 percent deposit does not necessarily mean you can complete an 90 percent LVR purchase with only that amount in the bank.
Allow for costs outside the deposit
Those costs vary by state, buyer eligibility and property. They need their own calculation. Our first home buyer deposit planner gives you a starting point for the deposit and likely upfront costs, but the result remains indicative until your full position and the property are checked.
LVR is not frozen forever. It can fall when you repay principal, when an accepted valuation rises, or through both at once. It can also rise if the property value falls or if additional lending increases the debt against it.
For an existing property, the same formula applies. If the home is valued at $900,000 and the loan balance is $630,000, the current LVR is 70 percent. That can be relevant to refinancing, pricing and an equity release, but usable equity is not simply every dollar between the loan and the value. A lender will apply its own maximum LVR and assess the new total debt.
For example, 80 percent of a $900,000 valuation is $720,000. Subtracting the existing $630,000 balance leaves up to $90,000 before costs as a simple equity estimate. Whether that amount can actually be borrowed still depends on purpose, servicing, credit assessment and policy.
A practical LVR check
LVR is the loan divided by the lender accepted property value, multiplied by 100.
It is a risk measure, not a complete home loan assessment. It tells you how much of the security is being borrowed, but it does not tell you whether the repayments are affordable, whether the property fits lender policy or how much cash you need for every cost at settlement.
Start with the calculation, then test the rest of the position. Use our borrowing power calculator and repayment calculator for an indicative view, or contact Vairo Finance to compare the actual lender options for your situation.
This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal; tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders credit assessment with terms and conditions, fees and charges and eligibility criteria apply. Vairo Finance Pty Ltd is a credit representative (581146) authorised under Australian Credit Licence 389328.
The information in this article is general in nature and does not take into account your personal circumstances. Speak with a qualified mortgage broker before making lending decisions.
