Loan-to-value ratio (LVR)
The size of your loan as a percentage of the property's value. It is a key measure lenders use to set risk and pricing.
- LVR = loan amount divided by property value
- Above 80% usually means paying LMI
- Lower LVRs often get better rates
How it works
Lenders use the lower of the purchase price and their own valuation. A lower LVR means less risk for the lender and more equity for you.
Why it matters
Your LVR affects whether you pay lenders mortgage insurance, your interest rate, and how much equity you can later use for another purchase.
Borrowing $560,000 to buy a $700,000 property gives an LVR of 80%. Borrowing $630,000 gives an LVR of 90%.
Illustrative only. Figures are examples, not a forecast or recommendation.
Investors often use equity from one property as the deposit for the next. Your LVR across the portfolio decides how far that can go.
Common questions
What is a good LVR?
80% or below avoids LMI with most lenders.
Does a bank valuation change my LVR?
Yes. If the valuation comes in below the price, your LVR rises.
Related terms
Sources
General information only. It does not consider your objectives, financial situation or needs, and is not financial, credit, tax or legal advice. Rules change, so check current law and get advice from a licensed professional before acting.