What Is LVR? A Guide for Home Buyers and Property Investors
If you’re researching home loans in Australia, you’ll quickly come across the term LVR. Understanding what LVR is — and how it affects your mortgage — can save you thousands in interest, fees, and unnecessary stress.
In this guide, we’ll break down what LVR means, how it’s calculated, why lenders care so much about it, and how you can use LVR strategically when buying or refinancing property.
What Is LVR?
LVR stands for Loan-to-Value Ratio.
It’s a percentage that shows how much you’re borrowing compared to the value of the property you’re buying or refinancing.
In simple terms, LVR tells the lender how much risk they’re taking on.
How Is LVR Calculated?
The LVR formula is straightforward: LVR = (Loan Amount ÷ Property Value) × 100
Example:
Property value: $800,000
Loan amount: $640,000
$640,000 ÷ $800,000 = 80% LVR
That means you’re contributing a 20% deposit, and the lender is funding the remaining 80%.
Why Does LVR Matter?
LVR plays a huge role in how lenders assess your loan. It directly impacts:
Interest rates
Whether Lenders Mortgage Insurance (LMI) applies
Loan approval strength
Available lenders and loan products
Generally speaking, lower LVR = lower risk for the lender.
Common LVR Thresholds Explained
80% LVR
Often considered the sweet spot
Usually avoids LMI
Access to sharper interest rates
Stronger loan approval profile
90% LVR
Smaller deposit required
LMI almost always applies
Fewer lenders available
Higher interest rates in many cases
95% LVR
Minimal deposit
High LMI costs
Limited lender options
Tighter assessment criteria
Some lenders may allow higher LVRs under special schemes, but each scenario needs careful structuring.
What Is LMI and How Does It Relate to LVR?
Lenders Mortgage Insurance (LMI) protects the lender, not you.
It usually applies when your LVR is above 80%.
Important to know:
LMI can cost thousands
It can sometimes be added to the loan (increasing LVR further)
Different lenders price LMI differently
In some cases, alternative structures or lender choices can reduce or eliminate LMI — even above 80% LVR.
LVR When Refinancing
LVR is just as important when refinancing as it is when purchasing.
Your refinance LVR is based on:
The current property value
Your remaining loan balance
If your property has increased in value, your LVR may have dropped — which can unlock:
Better interest rates
LMI removal
Access to equity for renovations or investment
Can LVR Change Over Time?
Yes — and this is where strategy matters.
Your LVR can improve through:
Paying down your loan
Property value growth
Making lump-sum repayments
Renovations that increase value
Many borrowers don’t realise they may qualify for better loan options simply because their LVR has improved over time.
Is a Lower LVR Always Better?
Not always.
A lower LVR reduces risk, but the right LVR depends on your goals, such as:
Entering the market sooner
Preserving cash flow
Investing rather than owner-occupying
Structuring debt efficiently
Sometimes using a higher LVR strategically makes sense — as long as the numbers stack up.
How a Mortgage Broker Helps With LVR Strategy
Different lenders treat LVR differently.
A good structure isn’t just about the percentage — it’s about policy, pricing, and long-term flexibility.
A Mortgage Broker can help you:
Compare lenders with different LVR policies
Structure loans to reduce or avoid LMI
Time valuations strategically
Use equity without over-leveraging
Final Thoughts: What Is LVR and Why It Matters
LVR is more than just a number — it’s one of the most important levers in your home loan strategy.
Whether you’re:
Buying your first home
Refinancing
Investing in property
Accessing equity
Understanding LVR puts you in control of your finance decisions.
Need Help Working Out Your LVR?
If you’d like help calculating your LVR or reviewing whether your current loan structure still makes sense, you’re welcome to book a no-obligation chat.
At My Finance Consultants, we work for you — not the lenders — to help you make confident, informed decisions on your homeownership and investing journey.