Loan to Value Ratio (LVR) guide
By Ali Hasani, Founder and Principal Mortgage Broker at Buyvest, MFAA accredited. Last updated July 2026. LMI figures are indicative ranges and vary by insurer, lender and borrower.
Most explanations get the formula subtly wrong, and the difference costs people thousands. This guide covers how lenders actually calculate LVR, what each band means, and how to move down one.
The short version: LVR is the share of a property's value you are borrowing, calculated against the lower of the purchase price or the bank's valuation. At or below 80% you avoid LMI and get the sharper rates. Above 80% LMI applies, and above 85% to 90% most lenders also start testing genuine savings. LMI is a one-off premium that is not refundable and does not follow you to a new lender.
How is LVR calculated?
LVR is your loan amount divided by the property value, times 100. The catch is what counts as property value: lenders use the lower of the purchase price or their own valuation, not whichever suits you.
On a $600,000 purchase with a $120,000 deposit, you borrow $480,000 and your LVR is 80%, provided the bank agrees the property is worth $600,000.
Why the valuation is the number that matters
A bank valuation is a conservative assessment ordered by your lender. It can land below what you agreed to pay, particularly on apartments, off the plan purchases, and in softening markets. When it does, the lower figure becomes the denominator and your LVR rises without you doing anything.
Worked example. You agree to buy at $750,000 with a $190,000 deposit, so you borrow $560,000. Against the price that is 74.7% LVR, comfortably under the threshold. The bank values the property at $700,000. Against that figure your LVR is exactly 80%, and a valuation any lower tips you over it. Same deposit, same loan, but now you are potentially paying LMI and losing your rate tier. The lender uses its own number.
This is why buying with a margin below your LVR target matters, and why a valuation shortfall on a 90% or 95% purchase is far more dangerous than on an 80% one. With little deposit spare, there is nothing to absorb the gap.
Why does LVR matter?
It sets your risk profile in the lender's eyes, and four things follow from it: approval, your interest rate, whether LMI applies, and whether your savings history gets tested.
Approval. Every lender has a maximum LVR, and it varies by property type, location and how you evidence income. Above their limit, the answer is no regardless of how strong you look otherwise.
Interest rate. Lenders price in LVR bands, typically sharpest below 60%, then 60% to 80%, then higher again above 80%. The spread between the best and worst tiers can be half a percentage point or more, which compounds across a 30-year loan.
LMI. Above 80% you generally pay a one-off premium that protects the lender, not you.
Genuine savings. This one surprises people. Once you are borrowing above roughly 85% to 90%, most lenders start testing not just how much deposit you have but where it came from, wanting to see around 5% of the purchase price held in your own account for at least three months. Below that threshold they scrutinise the source far less. Our genuine savings guide covers what counts.
Use our property deposit calculator to see what your deposit supports at each band.
What LVR should you aim for?
At or below 80% is the target, because that is where LMI disappears and rates sharpen. Whether it is worth waiting to get there is a separate question.
The honest answer depends on the gap. If you are six months from 20%, waiting usually pays. If you are four years away, you are paying rent and watching prices move while you save, which is why the government schemes exist. The Australian Government 5% Deposit Scheme lets eligible buyers sit at 95% LVR with no LMI at all, and Help to Buy cuts the loan itself through a government equity share.
Those change the maths, but they do not change the underlying position. At 95% LVR you still hold very little equity, which is covered in our benefits and risks guide.
How much does LMI cost at each LVR?
It rises steeply with LVR, not in a straight line. Moving from 90% to 95% typically costs far more than moving from 85% to 90%.
| LVR | Deposit | Indicative LMI on a $600,000 loan |
|---|---|---|
| 80% or below | 20% or more | None |
| 85% | 15% | Around $9,000 to $12,000 |
| 90% | 10% | Around $15,000 to $24,000 |
| 95% | 5% | Around $23,000 to $37,000 |
Indicative published ranges for a loan of this size, current at 2026. Premiums are set by the insurers, primarily Helia and QBE, and vary by lender, loan size and borrower profile. Two buyers at the same LVR can be quoted materially different amounts, so treat these as a guide and get a quote.
Capitalising LMI costs more than it looks
Most borrowers add the premium to the loan rather than paying it upfront. That does two things. It raises your recorded LVR, so a $450,000 loan with a $15,000 premium becomes $465,000 and around 93%, and lenders typically use that higher figure to set your rate. And you pay interest on it for the life of the loan. A $20,000 premium capitalised into a 30-year loan at 6.5% costs roughly $45,000 by the time it is repaid.
LMI is not refundable and does not follow you. Partial refunds for selling or refinancing early have been largely phased out by both major insurers, so assume the premium is gone once paid. It also insures that specific loan with that specific lender. Refinance while still above 80% and the new lender requires a fresh policy, meaning you pay in full a second time. That single fact is the strongest argument for getting below 80% before you refinance.
Want to know your real LVR?
We work out where you land once a lender values the property, and which lenders price your band best. 35+ lenders compared at $0 cost to you.
How much equity can you actually access?
Usable equity is your property value multiplied by 0.80, minus your outstanding loan balance. Lenders let you draw on equity while keeping you at or below 80% LVR, not up to the full value.
On an $800,000 property with a $480,000 loan, 80% of the value is $640,000, so your usable equity is $160,000. Your total equity is $320,000, but the portion a lender will release is half that, because the rest is the buffer that keeps you under the threshold.
This is the calculation behind using equity for a deposit on a second property, a renovation, or consolidating debt. Our home equity calculator runs it for your numbers, and the using equity to invest page covers what it can fund.
What else affects your maximum LVR?
Deposit size sets your starting point, but property type, location and how you evidence income all move the ceiling a lender will lend to.
Property type and size. Small apartments attract tighter limits at most lenders, and buildings with many similar units selling at once tend to be valued cautiously. Lenders also cap exposure to any single development, so several units in one block can be treated differently from the first one. Our strata guide covers what lenders look at.
Location. Postcodes with thin sales evidence, high investor concentration or declining values can carry reduced maximum LVRs. Rural and large acreage properties are usually treated more conservatively again.
Income documentation. Full documentation gets you to 80% comfortably and often 95% with LMI. Low documentation lending, common for self employed borrowers without standard returns, is typically capped between 60% and 80%.
Owner occupier or investment. Investment lending is generally capped lower than owner occupied, and rates climb more sharply as LVR rises.
How do you lower your LVR?
Increase the deposit, reduce the loan, or raise the value. A guarantor or a government scheme can do the work of a larger deposit without the cash.
A bigger deposit. Even a small increase can move you across a band. Going from 81% to 79% removes LMI entirely and repositions your rate, so the last few thousand often does more than the first fifty. The First Home Super Saver scheme and our budgeting guide both help.
A guarantor. A guarantor loan adds a family member's property as additional security, so the lender is secured across two properties and your functional LVR drops below 80% without you finding more cash. The guarantee can usually be released once your own LVR falls far enough.
Government schemes. The 5% Deposit Scheme removes LMI at 95% LVR, Help to Buy reduces the loan through equity, and the NSW First Home Owner Grant adds $10,000 on eligible new homes.
A revaluation. Lenders do not recalculate your LVR as values rise or as you repay principal. If your suburb has moved or you have paid down a decent chunk of the loan, requesting a revaluation can formally recognise it and drop you into a better band. Worth reviewing annually rather than waiting for a rate rise to prompt it.
Buying better. A more affordable property lowers your LVR on the same deposit, and choosing one a valuer will assess generously matters as much as the price you negotiate.
Frequently asked questions
How do lenders calculate LVR?
Loan amount divided by property value, times 100. Lenders use the lower of the purchase price or their own bank valuation, so a valuation below your contract price raises your LVR even though nothing about your deposit has changed.
What is a good LVR?
At or below 80%, because that is where LMI stops applying and rates sharpen. Some lenders price their best rates below 60%. Whether it is worth waiting to reach 80% depends on how far away you are and what the market does in the meantime.
How much does LMI cost?
On a $600,000 loan, published estimates run around $9,000 to $12,000 at 85% LVR, $15,000 to $24,000 at 90%, and $23,000 to $37,000 at 95%. Premiums are set by the insurers and vary by lender, loan size and borrower, so treat those as indicative and get a quote for your situation.
Is LMI refundable if I refinance or sell?
Assume not. Partial refunds for early refinance or sale have been largely phased out by the major insurers. LMI also insures one specific loan with one specific lender, so refinancing while still above 80% means a new policy and a second premium in full. Getting below 80% first avoids that.
Can I get a home loan at 95% LVR?
Yes, many lenders go to 95% with LMI. Eligible first home buyers can reach 95% without LMI through the 5% Deposit Scheme, which is usually the better route. At that level expect lenders to test genuine savings as well as deposit size.
How much equity can I access?
Usable equity is the property value multiplied by 0.80, minus your loan balance. On an $800,000 property with a $480,000 loan that is $160,000, even though your total equity is $320,000. Lenders keep you at or below 80% LVR when releasing equity.
Does capitalising LMI change my LVR?
Yes. Adding the premium to the loan raises the recorded LVR, and lenders typically use that higher figure when setting your rate. You also pay interest on the premium for the life of the loan, so a $20,000 premium on a 30-year loan at 6.5% costs roughly $45,000 in total.
Do lenders recalculate my LVR over time?
Not automatically. Your LVR is assessed at application and whenever you refinance or request additional funds. If your property has risen in value or you have paid down principal, you can request a revaluation to have a lower LVR formally recognised.
Is LVR different for investment loans?
Yes. Investment lending is generally capped at a lower maximum LVR than owner occupied, and rates rise more sharply as LVR increases. Each property carries its own LVR, though a lender may also consider your overall position across a portfolio.
Next steps
Model your position with the property deposit calculator, the home equity calculator and the mortgage repayment calculator. Then read the LMI guide for the cost side and the bank valuations guide for the number that decides it all.
Learn more about our team, or see our service areas across 220+ Sydney suburbs.
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Related resources
LMI explained | Bank valuations | Genuine savings | 5% Deposit Scheme | Deposit options | Guarantor loans | Using equity to invest
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This article is general information only and does not take your personal circumstances into account. LMI premiums are set by insurers and vary by lender, loan size and borrower, so the figures here are indicative ranges rather than quotes. Lender LVR limits, pricing and policies change. Confirm your position with a licensed broker or lender before relying on it. Ali Hasani is an Authorised Credit Representative (CRN 567392) of Connective Credit Services Pty Ltd (Australian Credit Licence 389328).
A lower Loan to Value Ratio (LVR) can help you secure better rates and avoid costly fees.
We show you how to make your LVR work in your favour.
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Please note that the views and opinions expressed in this post are general information only, and this is not financial advice.
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