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Loan-to-value ratio (LVR) is the size of your home loan expressed as a percentage of the property’s value, calculated as loan ÷ property value × 100. The single most important LVR number to remember is 80%: borrow more than 80% of the property’s value and most lenders will require you to pay Lenders Mortgage Insurance (LMI), an extra cost that protects the lender, not you. This guide explains how LVR is calculated, how lenders actually use it in practice, and how it shapes what you can borrow and what you’ll pay.
LVR — the loan-to-value ratio — is the proportion of a property’s value that you’re borrowing, shown as a percentage. The formula is straightforward:
Worked example: you’re buying a $500,000 property and you have $100,000 to put down. You’ll need to borrow $400,000, which gives you an LVR of 80%.
LVR has a flip side: equity. An 80% LVR means 20% equity. The two always add to 100%. As you pay down the loan or the property’s value rises, your LVR falls and your equity grows.
Lenders use LVR as a shorthand for risk. A borrower at 70% LVR has more deposit, more buffer, and is cheaper to lend to. A borrower at 95% LVR has less of all three, which is why high-LVR loans usually attract LMI, tighter credit checks, and sometimes higher rates.
Two real numbers, two divisions, multiply by 100. The maths is the easy part — the catch is which property value you use.
The formula: LVR = (loan amount ÷ property value) × 100
Worked example: you’re buying a $600,000 home with $100,000 in deposit. The loan is $500,000. Your LVR is $500,000 ÷ $600,000 × 100 = 83.3%, above the 80% line, so LMI likely applies.
A few things to keep in mind when you calculate it:
Blutin doesn’t have a dedicated LVR calculator, but the borrowing power calculator gets you to the same place by working out what you can borrow against a deposit and property price.
The most useful thing to know about LVR is that the bank decides the “V” in the equation, not you.
When you apply for a home loan, the lender orders their own property valuation — sometimes a desktop estimate or automated model, sometimes a full inspection by a valuer. If their valuation comes in at or above the contract price, your LVR is what you calculated. If it comes in below contract, your LVR rises.
On a $600,000 contract with a $500,000 loan, your LVR is 83%. But if the bank values the property at $570,000, your LVR against their number is 87.7%, and the deal changes. You may now need LMI, more deposit, or a different lender.
When a valuation comes in low, there are usually four moves:
This matters most when a property is unusual: high-density apartments, regional postcodes, off-the-plan purchases, or markets where prices are moving. Conservative valuations are more likely in those situations, and it’s worth knowing your options before you sign.
A lower LVR generally buys you three things, in order of practical importance:
1. No LMI. Below 80% LVR you typically avoid Lenders Mortgage Insurance, which can run from a few thousand dollars to $30,000 or more depending on the loan size and LVR band. LMI protects the lender if you default, not you. We cover the mechanics on the LMI guide.
2. Sharper rates and more lender choice. Lenders compete hardest at the lower-LVR end. Below 80% you’ll see more options; below 70% or 60% (what some lenders call premium or low-LVR tiers) you may see further discounts.
3. More borrowing power. A lower LVR means a bigger equity buffer, which can ease serviceability assessments and open up larger loan sizes on the same income.
The honest counterpoint: a higher LVR isn’t automatically bad. Plenty of well-structured loans sit above 80%, especially for first home buyers using federal schemes or a guarantor structure. What matters is whether the numbers actually work for your situation, which is a question of cash flow, not just LVR.
This is where the textbook answer to LVR ends and the broker-grade answer begins. The formula is one thing. What lenders do with the result once you apply is another.
Lenders cap LVR differently, and the cap depends on more than just you. A standard owner-occupier home loan is commonly available up to 95% LVR. With a guarantor structure, where a family member uses their property as additional security, the effective LVR can go higher. But the cap tightens fast for certain situations:
High-density apartments and inner-city units — lenders often apply a lower maximum LVR because the resale risk is higher.
Certain postcodes — every lender maintains a postcode-restriction list, especially for regional, volatile, or oversupplied markets. The same loan against the same income can get a different LVR cap in two different suburbs.
Investment loans — generally subject to tighter LVR caps and stricter serviceability than owner-occupier loans, reflecting APRA’s macroprudential stance on investor lending.
Construction, off-the-plan, and non-standard properties — usually capped lower than standard purchases.
LVR interacts with serviceability — they’re not separate hurdles. Australian lenders are required by APRA to assess your ability to repay at 3 percentage points above the actual interest rate (the 3% serviceability buffer). A high LVR doesn’t just attract LMI. It can tighten how that buffer is applied, because the lender’s downside is larger. Two borrowers with identical incomes can get different answers from the same lender depending on their LVR.
This is where a broker across 45+ lenders earns their place. Different lenders have meaningfully different LVR policies on the same property and the same borrower. One lender’s cap is another lender’s standard. At Blutin, before any application goes in, we do an Honest Assessment of where your LVR will sit against each lender’s policy, and if no lender on our panel is a genuine fit, we’ll tell you. A quick no can sometimes be the best answer. That discipline is why over 95% of the applications we submit are approved.
LVR isn’t static. It moves as your loan and your property’s value move, and you have more control over both than borrowers usually realise.
If you’re trying to get below the 80% LMI line before applying, the practical moves are: save a larger deposit, pay down existing debts (which also helps serviceability), reduce the purchase price target, or wait for a property revaluation if you already own. A broker can model these scenarios against actual lender policy before you commit to one.
Refinancing is one of the cleanest ways to see LVR working in your favour. Your loan balance is lower than when you took it out, and in most years the property is worth more. Both push LVR down, which can unlock options that weren’t on the table when you bought.
Three things a lower LVR can do at refinance:
1. Get you off LMI territory. If you paid LMI on the original loan because you were above 80%, refinancing once you’re below 80% means no second LMI payment with the new lender. LMI is not refundable when you switch.
2. Open up sharper rate tiers. Many lenders price loans in LVR bands (up to 60%, 60–70%, 70–80%, above 80%). Crossing a band at refinance can mean a meaningfully better rate.
3. Unlock equity access. A well-below-80% LVR can sometimes let you borrow against the equity for renovations, an investment property, or debt consolidation, though that raises your LVR again.
A practical tip: when you refinance, ask the new lender to order a fresh valuation. If your property has appreciated since purchase, the updated valuation pushes your LVR lower than the figure based on your original price. The reverse also applies. If values have softened, the new number may push it up.
We cover the refinancing decision in detail on the refinance home loan Melbourne page.
LVR is a planning tool, not a hurdle. It’s one of several inputs a lender uses, alongside income, expenses, credit history, deposit source, and the property itself.
What LVR tells you, in order of usefulness:
The best time to think about LVR is before you commit to a property, not after. A broker who knows the LVR policies of 45+ lenders can model your position across them in an afternoon.
LVR is the size of your home loan expressed as a percentage of the property’s value, calculated as loan ÷ property value × 100. A $500,000 property with a $400,000 loan has an LVR of 80%, which is the most-watched threshold because most lenders require Lenders Mortgage Insurance above it and waive it at or below.
Divide the loan amount by the property value, then multiply by 100. Example: a $500,000 loan on a $625,000 property gives an LVR of 80% ($500,000 ÷ $625,000 × 100). Important: use the lender’s valuation of the property, not the contract price. They sometimes differ, and the bank’s number is the one that counts.
Generally above 80% LVR. Most lenders require Lenders Mortgage Insurance once your borrowing exceeds 80% of the property’s value, with the cost rising as your LVR rises. There are exceptions: federal schemes like the First Home Guarantee, some professional packages, and guarantor structures can let you go above 80% without LMI. See our LMI guide for how it works in practice.
Yes. Standard owner-occupier loans are commonly available up to 95% LVR, and with a guarantor structure — where a family member uses their property as additional security — you can effectively borrow more. The trade-offs are LMI (above 80%), tighter credit checks, and a more careful serviceability assessment. It’s worth running the numbers with a broker before deciding whether a high-LVR loan is the right move for your situation.
No. LVR is the percentage of the property’s value you’ve borrowed; equity is the percentage you own outright. They always add to 100%. If your LVR is 70%, your equity is 30%. As you pay down the loan or the property’s value rises, LVR falls and equity grows. Equity is what you can potentially borrow against in future; LVR is what you owe now relative to the property.
Usually yes. A lower LVR generally means no LMI (below 80%), sharper interest rates and more lender choice (lenders compete hardest at lower LVRs), and stronger borrowing power. But it’s not the only thing that matters. Buying a year later with a lower LVR isn’t automatically better than buying now with a higher one. The right LVR is the one that makes the overall numbers work for your situation.
If you’re working out where your LVR will sit, whether you’ll be above or below the 80% line, or how to use a guarantor or refinance to lower it, that’s the conversation we have every day.
Book a 30-minute call with Nojan or phone 1300 188 808. No fee for the meeting, no paperwork before the call.