LVR Calculator: Calculate Your Loan-to-Value Ratio

What Is LVR?

Loan-to-Value Ratio, or LVR, is the percentage of a property’s value that you are borrowing.

For example, if a lender accepts a property value of 800,000andyouborrow640,000, your LVR is 80%.

In a simple example, the remaining 20% represents your deposit if you are buying or your equity if you already own the property.

Lenders use LVR as one part of assessing the risk of a home loan. A higher LVR means you are borrowing a greater proportion of the property’s value.

LVR is not the same as borrowing capacity. Borrowing capacity is primarily about whether a lender assesses that you can afford the loan based on your income, expenses, liabilities and other commitments.

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How Do You Calculate LVR?

The LVR formula is:

LVR = Loan amount ÷ Property value × 100

For example:

Property value: $800,000
Loan amount: $640,000

$640,000 ÷ $800,000 × 100 = 80% LVR

This means the loan represents 80% of the property value used in the calculation.

Another LVR Example

If your property is worth $600,000and you borrow$450,000:

$450,000 ÷ $600,000 × 100 = 75% LVR

Your LVR is 75%.

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What Does Your LVR Actually Mean?

Your LVR can influence:

• The lenders and home loan products available to you
• Whether Lenders Mortgage Insurance (LMI) may apply
• Interest rate pricing
• How much deposit or equity you may need
• Some lender credit policy requirements

The percentage itself does not determine whether your loan will be approved. Your income, expenses, liabilities, credit history, property and lender policy also matter.

What Do 80%, 90% And 95% LVR Mean?

LVR	Deposit/equity in a simple example	What it could mean
80%	20%	A common home-lending benchmark. Many standard home loans at or below this level can avoid LMI and may have broader lender and pricing options.
90%	10%	Higher-LVR lending may be available. LMI, different pricing or additional lender requirements can apply, although some borrowers qualify for an LMI waiver or guarantee.
95%	5%	Some lenders and eligible low-deposit programs allow borrowing at this level. Lender criteria, property restrictions and LMI treatment become particularly important.

These are general examples, not universal lender rules.

The maximum LVR and how the lender treats your application can depend on the borrower, property, loan purpose and lender policy.

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What Is Considered A Good LVR In Australia?

There is no single LVR that is best for every borrower.

An LVR of 80% or below is a common benchmark because many standard home loans at this level can avoid Lenders Mortgage Insurance (LMI) and may provide access to broader lender or pricing options.

A lower LVR can strengthen your lending position further, but that does not mean you should automatically use every available dollar to reduce your loan.

The more useful question is:

What LVR gives you a suitable combination of lender options, loan cost and cash remaining after settlement?

For one borrower, getting from 81% to 80% may make a meaningful difference. For another, retaining a larger cash buffer could be more important.

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Broker Insight: Small LVR Changes Can Matter

Whether your LVR is, say, 89.99% or 90.10% can have a large impact on your rate. Senior Mortgage Broker Vivienne Than explains, “Each bank has its own sweet spots for LVR that optimises interest rates. They could be every 5- to 10-point increase in LVR, like 80% to 85%, or 89.99% to 90.10% or 89% to 89.10%. For example, for one prominent lender, if you are looking at a $500K home loan with a standard variable rate, the interest rate is 6.74% at 89.1% LVR but 6.59% at 89%. I would ask my client to pay one-tenth of a point more in deposit to reduce their rate from 6.74% to 6.59%.”

Besides lowering your interest rate, the LMI you pay can also be lowered.

For example, if you were to buy a $1 million property in NSW, the LMI for 90.10% LVR is $32,408. However, if you lower your LVR to just 88.99%, you pay $22,725, saving you nearly $10,000 in LMI fees.

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How Much Deposit Do You Need For 80% LVR?

If the lender accepts the purchase price as the property value, an 80% LVR generally means you are contributing 20% of the property price yourself.

For an $800,000 property:

80% loan = $640,000

20% deposit = $160,000

The same relationship looks like this:

Deposit	Approximate LVR
5%	95%
10%	90%
20%	80%

This assumes the lender accepts the purchase price as the property value and there are no adjustments such as capitalised LMI.

Your property deposit is also not necessarily the total cash you need. Stamp duty, conveyancing, inspections and other purchase costs may need to be funded separately.

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Make Sense Of Your LVR

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Does LVR Affect Your Home Loan Interest Rate?

Yes, it does.

Many lenders use LVR bands when pricing home loans. Borrowers at different LVR levels may therefore receive different interest rates or discounts.

Generally, reducing the lender’s security risk can improve the range of pricing available, but there is no single LVR pricing structure used by every lender.

A small change in LVR can sometimes move your loan into another pricing tier.

Your final interest rate can also depend on:

• Whether the property is owner-occupied or an investment
• Principal-and-interest or interest-only repayments
• Loan amount
• Loan product
• Property
• Lender
• Other applicable pricing policies

This is why comparing the actual available loans can be more useful than assuming one LVR automatically produces one interest rate.

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How Does LVR Affect Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance (LMI) becomes relevant when a borrower takes out a standard home loan above 80% LVR.

LMI protects the lender, not the borrower, if the borrower defaults and the lender suffers a loss after selling the property.

However, an LVR above 80% does not automatically mean every borrower will pay LMI.

Depending on your circumstances, alternatives can include:

• A lender-specific professional LMI waiver
• A guarantor home loan
• An eligible government guarantee
• Another lender with a different LMI arrangement or policy

This is why 80% should be treated as an important benchmark rather than a universal rule.

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Which Property Value Does The Lender Use To Calculate LVR?

The property value used by the lender may not always be the figure you enter into an online calculator.

For a standard property purchase, lenders commonly consider the contract purchase price and their own valuation when determining the value used for lending purposes.

In many cases, the lower of the purchase price and lender valuation is used, although exceptions can apply depending on the transaction and lender.

For refinancing, there is no new purchase price, so the calculation is generally based on the current property value accepted by the new lender.

What Happens If The Bank Values The Property Below The Purchase Price?

A lower lender valuation can increase your effective LVR and may mean you need to contribute more money.

Consider a property being purchased for $1 million.

You plan to borrow at 90% LVR:

Expected loan: $900,000
Expected contribution: $100,000

Now suppose the lender accepts a property value of only $950,000.

If the lender is willing to lend 90% of that value:

$950,000 × 90% = $855,000

Your contribution towards the purchase price would then become:

$1,000,000 − $855,000 = $145,000

You would need $45,000 more than the original $100,000 estimate, before allowing for stamp duty and other buying costs.

This is one reason not to assume that a percentage of the purchase price is the only amount of cash you may need.

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How Do You Calculate LVR When Refinancing?

When refinancing, calculate your LVR using your current or proposed loan amount and the property’s value accepted by the new lender.

The formula remains:

LVR = Proposed loan amount ÷ Lender-assessed property value × 100

For example:

Property value: $800,000
Loan balance: $550,000

$550,000 ÷ $800,000 × 100 = 68.75% LVR

Your estimated LVR is 68.75%.

Your refinance options still depend on the new lender’s valuation, your borrowing capacity, loan purpose, property, credit history and lender policy.

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How Do LVR And Equity Work Together?

LVR is the percentage of the property value you owe while equity is the difference between the property’s value and what you owe.

For example:

Property value: $800,000
Loan balance: $500,000

Your LVR is:

$500,000 ÷ $800,000 × 100 = 62.5%

Your total equity is:

$800,000 − $500,000 = $300,000

That means you have approximately 37.5% equity.

However, total equity is not the same as usable equity.

If, for example, you wanted the total loan to remain at 80% LVR:

$800,000 × 80% = $640,000

$640,000 − $500,000 = $140,000

That gives $140,000 of potential additional borrowing before costs in this simplified example.

The lender still needs to approve the additional lending based on your ability to repay it, the purpose of the funds, the property and its credit policy.

How Does Property Growth Affect Your LVR?

If your property increases in value while your loan balance stays the same, your LVR can fall.

Suppose you owe $500,000.

If the property is worth $700,000:

$500,000 ÷ $700,000 × 100 = 71.4% LVR

If its accepted value later rises to $800,000:

$500,000 ÷ $800,000 × 100 = 62.5% LVR

That lower LVR may affect your equity position, lender options or refinance pricing.

However, when applying for a new loan or refinance, the figure that matters is the property value accepted by the lender rather than an online estimate or your own assessment of the property’s value.

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How Can You Lower Your LVR?

If you want to avoid a high LVR loan, here are four ways to decrease your LVR:

• Save for a higher deposit so your LVR is not in LMI territory. Ideally, you want to keep your LVR below 80%.
• If a family member is willing to guarantee your loan with their property, you can avoid LMI and borrow up to 100% or more of the property value.
• Check out government schemes and programs that waive LMI for first-home buyers.
• See if you qualify for waived LMI. Certain professions, such as doctors, lawyers and accountants, could qualify for waived LMI.

Not Sure What Your LVR Means For Your Loan?

Knowing your LVR is useful. Knowing what lenders will do with that LVR is more important.

Or use our 360° Home Loan Assessor to get a broader view of your home-loan position in about two minutes, with no login and no credit enquiry.

Home Loan Experts can assess how your LVR interacts with lender policy, property valuation, LMI, interest rate pricing and your overall borrowing position. Get a free assessment or call 1300 889 743 to talk to our mortgage experts today.