What is LVR (Loan-to-Value Ratio)?

How it's calculated

LVR = (loan amount ÷ property value) x 100. Buy a $500,000 home with a $50,000 deposit and you're borrowing $450,000, so $450,000 ÷ $500,000 x 100 gives you a 90% LVR. The smaller your deposit relative to the price, the higher your LVR, and the more risk you're asking the lender to carry.

Why lenders care

LVR is a rough proxy for how exposed the lender is if you default. A lower LVR means more of your own equity is on the line before the lender loses anything, which generally translates into a lower interest rate, no LMI requirement, and a wider pool of lenders willing to approve you.

The 80% threshold

80% LVR means a 20% deposit, and it's the single most important number in Australian home lending. Cross above it and most lenders require Lenders Mortgage Insurance (LMI), a policy that protects the lender, not you, even though you're the one who pays for it. Using the rate table behind our LMI Calculator, a $600,000 property at 90% LVR (a 10% deposit) works out to roughly $8,100 in indicative LMI. Drop to a 5% deposit, 95% LVR, and that jumps to around $19,950, more than double for an extra 5% borrowed. LMI is usually capitalised into your loan rather than paid upfront, so you end up paying interest on the premium too, over the life of the loan. These figures are indicative estimates only, run your own numbers and get an exact quote from your lender before relying on them.

How rates tend to move with LVR

As a rough guide, and rates vary by lender and shift with the market, so don't treat this as precise: LVRs of 60% or under tend to get the sharpest rates on offer, 60-80% is usually competitive with only a modest premium, and above 80% rates typically step up further on top of the LMI requirement, with 90-95% LVR loans generally attracting the highest rates and strictest conditions. Check what you could actually borrow with our Borrowing Power Calculator.

Ways to bring your LVR down

Saving a bigger deposit is the obvious lever. A guarantor loan is another, where a family member offers equity in their own property as extra security, which can bring your effective LVR under 80% without you needing the full deposit yourself. Government schemes are a third option, covered next.

Government schemes that skip LMI

The First Home Guarantee lets eligible first home buyers purchase with as little as a 5% deposit (95% LVR) without paying LMI, the government guarantees the remaining gap to 80%. Since a major expansion from 1 October 2025, the scheme has no income caps and no fixed annual place limit, though property price caps still apply and vary significantly by location, confirm the current cap for your area at housingaustralia.gov.au before assuming a property qualifies.

The Family Home Guarantee is aimed at single parents and single legal guardians with at least one dependent child, allowing a deposit as low as 2% with no LMI. The regional-specific scheme that used to run alongside these has since been folded into the expanded First Home Guarantee, which now covers regional areas under the same rules. All of these are administered by Housing Australia through participating lenders, and eligibility conditions apply, check the current details before assuming you qualify.

Don't forget stamp duty

Your deposit needs to stretch far enough to cover stamp duty as well as the deposit itself. If you haven't budgeted for it separately, stamp duty can eat into what you actually have available toward the deposit, pushing your real LVR higher than you planned for.

LVR when you refinance

At purchase, LVR is based on the lower of the purchase price or the lender's valuation. At refinance, it's recalculated using your current outstanding balance against a fresh valuation of the property, the original purchase price no longer matters. Say you bought a $500,000 home with an $80,000 deposit, an 84% LVR, and five years later your balance has fallen to $380,000 while the property is now valued at $650,000. Your refinance LVR is $380,000 ÷ $650,000, or about 58.5%, low enough to unlock better rates and skip LMI entirely on the new loan.