Example (Australia)
Property value $900,000 and loan $765,000 gives LVR 85%. This can trigger LMI depending on lender policy.
What is Loan-to-Value Ratio (LVR)?
Quick definition
LVR is the percentage of a property value you borrow. A higher LVR usually means higher lender risk.
Home loansBorrowing capacityGeneral
Overview
Loan-to-Value Ratio compares your loan amount to the property value used by the lender. It is shown as a percentage and is one of the first risk checks in Australian home lending.
For example, borrowing $640,000 against an $800,000 property gives an LVR of 80%. If the property value is lower than your purchase price at valuation, your effective LVR can be higher than expected.
Many policy thresholds in Australia are tied to LVR bands, especially around mortgage insurance, pricing, and approval conditions.
Formula
LVR (%) = (Loan Amount / Property Value) × 100Example
Why it matters
- Higher LVR can increase borrowing costs and reduce product options.
- LVR affects whether Lenders Mortgage Insurance may apply.
- Valuation outcomes can change your final LVR before approval.
Used in these calculators
FAQs
Lenders usually assess LVR using the lower of contract price or valuation for risk purposes.