The Loan to Value Ratio (LVR) is the amount you are borrowing expressed as a percentage of the property's value. You take the loan amount, divide it by the purchase price or the valuation figure — whichever the lender uses — and multiply by 100. If you are buying a home worth $500,000 and borrowing $400,000 against a $100,000 deposit, your LVR is 80%. The larger your deposit, the lower your LVR. A refinance LVR is calculated the same way, using the current valuation rather than a purchase price.

LVR is not a single rule you have to clear. It is the lever that sets which lenders will look at the deal, what rate band you sit in, and whether Lender's Mortgage Insurance (LMI) comes into play. Every lender draws its own lines, so the same deposit can read as comfortable at one lender and tight at another.

Why the LVR matters

Lenders set their own maximum LVR for each product, and those limits are published with the product data. As a very general guide, a 20% deposit (an 80% LVR) is the band where most home loans sit comfortably, though First Home Buyer grants and schemes at the state and federal level often soften that requirement.

The logic is simple from the lender's side: the lower the LVR, the smaller their exposure if anything goes wrong, so lower-LVR loans generally attract sharper pricing. Above 80%, the lender is carrying more risk, which is where LMI, or a guarantor, usually enters the picture. LMI is an insurance premium you pay that protects the lender — not you — against loss if the loan is not repaid. A guarantor, typically using equity in another property, can lift your effective deposit and keep you under the LMI threshold.

One point worth holding onto: an acceptable LVR does not, on its own, qualify you for a loan. Meeting the deposit test is necessary but not sufficient. You still have to demonstrate serviceability — that you can comfortably meet the repayments on the lender's terms. LVR opens the door; serviceability decides whether you walk through it.

What counts as a good LVR

Most lenders treat anything at or above 80% LVR as carrying additional risk, and price and condition the loan accordingly. Sitting under 80% is generally the stronger position: you avoid LMI, you widen the field of lenders willing to consider you, and you tend to access better rates.

That said, a higher LVR is not a wall. Most banks will lend up to 95% of a property's value, with conditions attached for anything over 80%. Borrowers who fit a lender's "professional" or low-risk criteria are sometimes assessed more generously at higher LVRs. The property's value here is set by an independent valuation, which has little to do with what you actually paid for it — a distinction that matters more often than people expect.

Location can also move the line. In some "higher risk" postcodes — frequently rural or regional areas where values are less predictable, though occasionally inner-city pockets too — a lender may cut its maximum LVR below the usual 80%, or apply extra conditions. Valuation and LVR policy varies meaningfully from lender to lender, so a postcode that constrains one lender may sit fine with another.

How lenders value the property

Lenders do not always order a full valuation. Where a deal meets certain criteria, a bank may use a desktop valuation (an automated model, or AVM), a restricted or drive-by assessment, or simply adopt the price on the Contract of Sale — rather than the slower, more expensive full inspection. The depth of valuation a lender runs is usually driven by the LVR and the perceived risk of the deal.

As a general guide, a lender may accept the contract price and skip a formal valuation where:

These thresholds are indicative and vary by lender. The practical takeaway is that your LVR shapes far more than your deposit — it influences how the property is valued, which lenders will consider you, what conditions attach, and where your rate lands. Getting the structure right around the LVR, rather than simply clearing it, is usually where the value sits.

If you want to know where your deposit, your target property and your borrowing goal actually leave you across different lenders' policies, that is worth mapping properly. Book a strategy session and we will work through the numbers with you.

General information only — not personal financial product or credit advice. Lending is subject to each lender's policy, your full circumstances and responsible-lending assessment. AeFin is an Australian Credit Representative (CR 464548) of Finsure (ACL 384704).