Loan to Value Ratio (LVR): What It Is & How It's Calculated

Updated 12 Mar 2026Content was accurate at the time of publication

A property purchase or refinance often hinges on one simple number: your Loan to Value Ratio (LVR). Understanding LVR—and how lenders treat it—can change your financing options, costs and chance of approval. This guide explains what LVR means, how LVR is calculated with clear AUD examples, how LVR affects Lenders Mortgage Insurance (LMI) and pricing, and practical steps to lower your LVR before you apply.

What is loan to value ratio (LVR)?

Loan to Value Ratio (LVR) is the percentage that relates the amount you want to borrow to the value of the security (typically property). Lenders use LVR as a straightforward measure of risk: higher LVR means higher lender risk.

LVR (also written as "loan-to-value") is used in residential home loans, investment property loans, refinancing, equity access and commercial lending, though thresholds differ by product type.

The formula is simple:

LVR = (Loan amount ÷ Property value) × 100%

As you plan finance options, you may also want to explore related topics: Novated Lease, Finance Lease, Guarantee, Deposit.

How LVR is calculated

The formula is straightforward and used by all lenders:

LVR = (Loan amount ÷ Property value) × 100%

Here's how it works:

Numerator: the total loan balance requested (including any amounts the lender allows you to capitalise, such as some fees or LMI)
Denominator: the property value (purchase price or lender valuation, whichever the lender adopts)
Multiply by 100 and round to one decimal place (most lenders report LVR to one decimal)

Example calculation:

LVR = \$150,000 ÷ \$100,000 × 100% = 90.0%

For loans with multiple securities or cross-collateralisation, lenders combine values and loan amounts across the package to calculate an overall LVR for assessment.

Worked examples and calculator

Use these worked examples as templates for your own situation:

Example 1 — First home buyer with 10% deposit

Purchase price: $100,000
Deposit: 10% = $10,000
Loan amount requested: $100,000 − $10,000 = $130,000
LVR: $130,000 ÷ $100,000 × 100 = 90.0%

Example 2 — 20% deposit (typical no-LMI threshold)

Purchase price: $100,000
Deposit: 20% = $140,000
Loan amount: $160,000
LVR: $160,000 ÷ $100,000 × 100 = 80.0%

Example 3 — Refinancing where valuation increased

Existing loan: $160,000
Current market valuation: $150,000
New LVR: $160,000 ÷ $150,000 × 100 = 74.7%

You can use an interactive LVR calculator to test your own scenarios. For ready-made tools and home loan resources, visit Emu Money's home loans page.

Why LVR matters for borrowers and lenders

LVR affects multiple decisions and costs:

Interest rates and pricing: higher LVR usually attracts higher margins because the lender's risk is greater
Fees and conditions: loans above key LVR thresholds commonly include additional fees or stricter servicing tests
Borrowing capacity: lenders use LVR alongside serviceability to determine how much you can borrow
LMI and guarantee requirements: Lenders may require Lenders Mortgage Insurance once your LVR exceeds thresholds
Approval likelihood: very high LVRs (e.g., >95%) often face tighter scrutiny or may be declined unless offset by strong borrower income or guarantees

For more on how different loan structures impact LVR and risk, see Deposit.

LVR and Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance protects the lender if you default; the borrower pays the premium. Here's what you need to know:

Typical trigger: LMI commonly applies at >80% LVR (i.e., when your deposit is less than 20%)
Who pays: the borrower—the premium may be paid upfront or capitalised into the loan (which increases LVR)
Cost drivers: insurers band premiums by LVR ranges and loan size—higher LVR and larger loans attract higher premiums
Alternatives to avoid LMI:
- Provide a guarantor or family pledge (see Guarantee)
- Increase your deposit
- Use a lower-LVR product or staged borrowing

For authoritative guidance on LMI and lending practices, see the MoneySmart page on Lenders Mortgage Insurance and ASIC's consumer guidance on home loans.

What counts as "value" — valuation methods and timing

"Value" can differ by context:

Purchase price: lenders sometimes accept the contract price but usually rely on their own valuation
Bank/lender valuation: an independent or in-house valuer assesses market value for lending purposes and typically controls LVR
Market appraisal: online estimates or agent appraisals can be used early in the process but may not be accepted for final LVR
Construction loans: staged valuations are used; LVR is measured at each draw against the completed stage's assessed value
Timing: valuations done pre-settlement influence approval; post-settlement revaluations affect refinancing or redraws

If a lender's valuation is lower than the purchase price, your LVR increases and you may need more deposit or alternative arrangements.

LVR differences by loan type and borrower profile

Typical acceptable LVRs vary by loan type and lender appetite:

Owner-occupier (principal & interest): up to 95% with LMI; many lenders prefer ≤80% for competitive pricing
Investor loans: often capped lower; investor products may be priced higher at the same LVR
Commercial loans: LVR bands are tighter and maximum LVRs usually lower than residential
Interest-only loans: may attract stricter LVR limits or higher rates at the same LVR
Low-doc/alternative documentation: lenders typically require lower LVRs or extra security
Guarantor-backed loans: effective LVR can be reduced by including guarantor security

For comparisons across funding types, see related A–Z topics where collateral rules may differ for vehicle and equipment finance.

How to lower your LVR

Practical steps to reduce LVR:

Increase your deposit: save more or use documented gifted funds
Pay down principal: make extra repayments if possible
Capital improvements: renovate to increase market value before refinancing (validate with a valuation)
Use a guarantor or family pledge: can reduce effective LVR for the borrower
Split the loan: secure part of the loan with a larger deposit to reduce the LVR on that portion
Refinance after valuation uplift: refinancing after an increase in market value can remove LMI or secure better pricing
Include eligible collateral: add another property as security where acceptable

See Deposit for tactics and planning.

LVR when refinancing or accessing equity

Refinancing and equity access depend on current LVR:

Equity release: lenders assess current market value and loan balance to calculate LVR—increased valuations can free up borrowing room
Redraw vs top-up: redraw reduces outstanding balance (lowers LVR); a top-up increases the balance and LVR
LMI implications: if a refinance raises your LVR above 80%, LMI may apply unless other security or lender concessions exist
Revaluation timing: lenders usually require up-to-date valuation evidence for refinancing decisions

Consider consulting a specialist broker for tactical refinancing options.

Typical lender responses to LVR bands

LVR band	Likely lender outcomes
≤60%	Low pricing, wide product access, high approval likelihood
60–80%	Competitive pricing, typically no LMI, standard approval checks
80–90%	LMI likely, pricing premium, stricter serviceability checks
>90%	LMI almost certain, limited product access, higher rate loads, lender discretion high

This table is a general guide—individual lender policies vary.

FAQ

Does LVR include stamp duty and purchase fees?

Typically no—LVR uses loan amount versus property value. If you capitalise stamp duty/fees into the loan and the lender accepts those capitalised amounts, the loan amount used in the numerator will include them, which raises LVR.

What if the lender valuation is lower than the purchase price?

A lower valuation increases your LVR. You may need to increase deposit, renegotiate the price, or provide other security.

Can my LVR change after settlement?

Yes—if you make repayments or the property value changes (revaluation), LVR will change.

Who pays LMI and can it be refunded?

The borrower pays LMI; premium refunds are rare and depend on insurer and lender policies if the loan is repaid early.

Do all lenders use the same LVR bands?

No—bands and pricing differ between lenders and loan products.

Will a guarantor reduce my LVR?

A guarantor can effectively reduce your assessed LVR for lending purposes if the guarantor provides approved security, but documentation and lender approval are required.

Can you borrow over 100% LVR?

Some lenders allow over-100% in special cases (e.g., certain fees capitalised), but this is uncommon and treated as high risk.

Are valuation methods standardised?

Lenders may use in-house valuers, panel valuers, or automated valuation models; methods vary and affect assessed value.

Where can I learn about LMI in more detail?

Visit the MoneySmart page on Lenders Mortgage Insurance for comprehensive guidance.

Do prudential rules influence LVR policies?

Yes—APRA guidance on residential mortgage exposures influences lender appetite and macroprudential settings.

Key takeaways

LVR is a critical metric that determines your borrowing costs, LMI requirements and approval chances. Keeping your LVR below key thresholds—typically 80% to avoid LMI—gives you access to better rates and simpler lending terms. You can lower your LVR by saving a larger deposit, making extra repayments, using a guarantor, or refinancing after your property increases in value. Understanding your LVR early gives you options to reduce costs and improve approval chances.