Loan to value ratio or LVR simply refers to the amount you are borrowing compared to total property value.

For example, you are considering buying a property valued at $1 million and you have a 10% deposit ($100,000):

  • Property value: $1,000,000
  • Deposit amount: $100,000 (10%)
  • Loan amount: $900,000 (90%) - this is the LVR (loan to value ratio) percentage

In the above example the LVR is 90%, because the amount you need to borrow is 90% ($900,000) of the property value ($1,000,000).

Loan to value ratio LVR calculator

Calculating LVR is fairly straightforward, it is the property value (100%) - deposit (%) = LVR (%).


  • 5% deposit equates to 95% LVR
  • 10% deposit equates to 90% LVR
  • 15% deposit equates to 85% LVR
  • 20% deposit equates to 80% LVR
  • 30% deposit equates to 70% LVR
  • 40% deposit equates to 60% LVR

The value is the lender-assessed value or bank valuation which is based on the current market value of the property, will usually have regard to a formal valuation prepared by registered valuer at the request of the lending institution.

Advantages of low LVR

There are many benefits of having a low LVR for the borrower taking out a home loan. Whether you are buying your first home, your dream home or an investment property, the loan to value ratio LVR can influence the competitiveness of the loan.

Having an LVR of 80% or lower may help you borrow more at lower rates and with lower repayments

What is Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance (LMI) is insurance that a lender takes out to insure itself against the risk of not recovering the outstanding loan balance if you, the borrower, are unable to meet your loan payments and the property is sold for less than the outstanding loan balance. LMI is an additional cost to the borrower.

A guarantor home loan could be an option if you want to avoid LMI. A guarantor is someone who uses their own equity to secure your home loan. This person is often an immediate family member or close relative. The equity would just need to be enough to cover that 20% deposit to avoid LMI.

Meeting the credit criteria

Most lenders require a certain LVR or lower before they will consider lending to you. This is one of the main criteria along with your ability to make loan repayments.

Why is LVR important?

Loan to value ratio LVR is important when applying for a home loan for the same reasons that deposits are important, the bigger your deposit, the less you have to borrow.

Banks commonly use LVR to assess the risk of a loan, with a higher LVR representing a higher risk to the lender. Generally speaking, a low LVR home loan has less risk for the lender.

As always, when considering a loan product you must consider your personal circumstances and your financial goals. Before acquiring a loan product please check the Target Market Determination and Product Facts Sheet to see if the product suits your individual needs.