Loan to Value Ratio (LVR)
LVR is the loan amount expressed as a percentage of the property value. It's the single biggest driver of rate, LMI, and which lenders will look at your file.
How LVR is calculated
LVR = (loan amount ÷ property value) × 100. A $640K loan on an $800K property = 80% LVR. The property value is the lender's valuation (usually a desktop or short-form val), not your purchase price — although they're often the same number.
LVR is calculated on the lower of purchase price or valuation, not the higher. Lenders use this rule to protect themselves from buyers overpaying.
The 80% threshold
80% LVR is the line in the sand for two reasons. Above 80%, almost every Australian lender will require Lenders Mortgage Insurance (LMI), which can cost $5,000-$30,000+ depending on loan size. And every lender has a sharper rate tier for ≤80% LVR — the discount is typically 0.10-0.30% p.a. compared to the 80-90% tier.
- ≤60% LVR — the cheapest tier most lenders publish (rare, requires 40%+ deposit)
- ≤70% LVR — second-best pricing on most variable products
- ≤80% LVR — the standard "no-LMI" sweet spot
- 80-90% LVR — LMI applies, rate tier is usually one notch higher
- 90-95% LVR — LMI is significant, only some lenders accept this band
- 95%+ LVR — Home Guarantee Scheme territory or specialist lenders only
Ways to get under 80% without saving more
Family guarantor loans let a parent's equity boost your effective deposit so the bank loan stays under 80%. The Home Guarantee Scheme (FHBG, FHG, RFHBG) lets eligible buyers borrow up to 95% with no LMI because the government partially guarantees the loan. Both are legitimate ways to skip LMI without 20% cash on hand.
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