What Is LVR and Why Does It Matter?
Loan-to-value ratio is the single most important number in property finance. Here's what it means and why every investor needs to know it.
If you're investing in property, your Loan-to-Value Ratio (LVR) is the number that determines how much you can borrow, what interest rate you'll pay, and whether you need Lenders Mortgage Insurance (LMI).
What is LVR?
LVR is your loan amount divided by the property value, expressed as a percentage.
Example: You buy a $600,000 property with a $480,000 loan. LVR = $480,000 ÷ $600,000 = 80%
Why 80% is the magic number
Most Australian lenders use 80% as the threshold:
- Below 80% LVR — No LMI required, better interest rates, easier approval
- Above 80% LVR — LMI applies (a one-off fee that can cost $10,000+), stricter assessment
- Above 90% LVR — Fewer lenders will consider your application
How LVR affects investors
As your property grows in value, your LVR drops. A property purchased at 80% LVR that grows 10% now sits at roughly 73% LVR — unlocking usable equity you can borrow against for your next investment.
This is the core engine of portfolio growth: buy, wait for equity gains, then use that equity as a deposit for the next property.
The takeaway
Track your LVR across every property. When it drops below 80%, you may have enough usable equity to fund your next deposit without saving a cent.