LVR (Loan-to-Value Ratio)

Loan-to-Value Ratio (LVR) is calculated by dividing the loan amount by the property’s assessed value and expressing the result as a percentage.

Formula

LVR = (Loan Amount ÷ Property Value) × 100

For example, a $400,000 loan on an $800,000 property has an LVR of 50%.

Why LVR matters

• Above 80% LVR: Most lenders require mortgage insurance (often called lenders mortgage insurance or private mortgage insurance), which adds significant cost to the loan
• Below 80% LVR: Generally avoids mortgage insurance and may attract better interest rates
• Below 60% LVR: Often qualifies for the most competitive rates

LVR and property investment

For investment properties, lenders often apply stricter LVR limits than for owner-occupied loans. Understanding your LVR helps model the true cost of property ownership, including any mortgage insurance premiums.