What is LVR and why does it matter?
LVR is loan amount divided by property value. It sets how much you can borrow, what rate you pay and whether you owe lenders mortgage insurance.
What is LVR?
Your loan-to-value ratio (LVR) is the loan amount divided by the property value, as a percentage. A lender uses it to decide whether you pay lenders mortgage insurance (LMI).
Example: you buy a $600,000 property with a $480,000 loan. LVR = $480,000 ÷ $600,000 = 80%.
Why 80% is the number lenders watch
- Below 80% LVR: no LMI, better rates, an easier approval
- Above 80% LVR: LMI applies, and it isn't small; the fee alone can run past $10,000
- Above 90% LVR: the pool of lenders willing to look at you shrinks fast
How LVR moves as your property does
When property values climb, LVR falls. Buy at 80% LVR, get 10% growth, and you're sitting closer to 73% without paying down a dollar of the loan. The gap between what the bank is owed and what the place is worth is usable equity, and it can fund the next deposit.
What to do with it
Check the LVR on every property you hold, and see how much a lender would let you borrow with our borrowing power calculator. Once it drops below 80%, you may be able to fund the next deposit from equity you already have instead of saving for another six months.