After the bank said no, a new plan across two states.
What is a loan-to-value ratio (LVR)?
A loan-to-value ratio (LVR) is the size of your loan as a percentage of the property's value, as assessed by the lender. Borrow $400,000 against a $500,000 property and your LVR is 80%. Lenders use it to price risk and decide whether to charge LMI.
Updated
How do you calculate LVR?
Divide the loan amount by the property's value, then multiply by 100. A $450,000 loan on a $600,000 home is an LVR of 75%.
The lender decides the value. If its valuation comes in below your purchase price, your LVR is higher than you planned and you may need a larger deposit.
Why does 80% matter?
Most lenders treat an LVR above 80% as higher risk. Above that line they usually charge LMI, and some apply tighter lending criteria or higher interest rates.
A lower LVR generally means lower costs and a better chance of approval.
How does LVR relate to equity?
Equity is the part of the property you own outright: its value minus the loan. As your LVR falls, your equity grows.
An 80% LVR is often used to estimate extra borrowing without LMI. It is not a universal lending cap. Usable equity still depends on the lender's valuation, credit policy and assessment of your ability to repay.
Illustrative example5 steps
A lower valuation leaves a deposit shortfall
- Agreed purchase price: $700,000, with a planned loan of $560,000.
- The lender values the property at $665,000 instead of the agreed price.
- Revised LVR: $560,000 divided by $665,000, multiplied by 100 = about 84.2%.
- An 80% LVR permits a loan of $665,000 multiplied by 0.8 = $532,000.
- Loan shortfall: $560,000 minus $532,000 = $28,000 more deposit needed to keep the LVR at 80%.
For investors
LVR measures the security margin on each investment loan.
For investors, LVR is more than an approval hurdle. It sets how much equity you can access, how exposed you are if values dip and whether each new loan carries LMI. Tracking the LVR on every property helps you plan the next purchase, or decide to hold.
Common questions
Questions about LVR
Keep learning
Property is a complex world.
Loan-to-value ratio is one piece of it. Lending rules decide how much you can borrow, and how soon you can buy again. Next, read about lenders mortgage insurance, equity and borrowing capacity.
Success stories
Where lending shaped the plan.
If you want help
How to choose a buyer's agency.
Four questions to ask any agency, with our answers.
Who pays you?
You do. Never a developer or the selling agent, who works for the vendor.
What is your track record?
Founded in 2018 by Arjun Paliwal, with 3,100+ completed purchases and 850+ five-star Google reviews. REB Buyer's Agency of the Year, winner 2023, 2024 and 2026.
How do you choose a property?
A QPIA-qualified strategist sets the plan. Every shortlisted property passes our 20-point due diligence.
What happens after settlement?
Portfolio reviews, and a Portfolio Wealth Blueprint for what comes next.