LVR — Loan to Value Ratio — is one of the most important numbers in the Australian home loan market. It determines your interest rate, whether you pay Lenders Mortgage Insurance, and how much you can borrow. Here is everything you need to know.
What Does LVR Mean?
LVR is the percentage of the property’s value that you are borrowing. It is calculated as:
Example: If you buy a $800,000 property with a $640,000 loan, your LVR is 80% ($640,000 ÷ $800,000 × 100).
LVR Thresholds — What They Mean
| LVR | What it means | LMI required? |
|---|---|---|
| 60% or below | Excellent — best rates available | No |
| 61% – 80% | Standard — most competitive rates | No |
| 81% – 90% | Higher risk — slightly higher rates | Yes |
| 91% – 95% | High risk — significantly higher rates | Yes (costly) |
What Is Lenders Mortgage Insurance (LMI)?
If your LVR is above 80%, most lenders require you to pay Lenders Mortgage Insurance. LMI protects the lender (not you) if you default on the loan. Despite protecting the lender, you pay for it.
LMI costs vary significantly by LVR and loan amount. On a $600,000 loan at 90% LVR, LMI typically costs $12,000–$18,000. It can be added to your loan (capitalised) or paid upfront.
How to Reduce Your LVR
- Save a larger deposit — every extra 1% of deposit reduces LVR by 1%
- Buy a cheaper property — same deposit = lower LVR
- Use a guarantor — a family member can provide security to reduce effective LVR to 80%
- First Home Guarantee — government scheme allows eligible FHBs to buy with 5% deposit without paying LMI
- Wait and save more — time is the simplest solution if you are close to 80%
LVR and Interest Rates
Lenders price risk through LVR tiers. A borrower at 60% LVR will typically get a lower rate than a borrower at 90% LVR — sometimes 0.3–0.5% lower. On a $700,000 loan, a 0.4% rate difference saves $2,800 per year.
Calculate Your LVR and Repayments
Enter your property value and loan amount to see your LVR and monthly repayments.
Disclaimer: General information only. Not financial advice. Always consult a licensed professional.