What Is LVR and How Do You Calculate It?

The short answer

LVR (loan-to-value ratio) is the size of your home loan expressed as a percentage of the property's value: LVR = loan amount ÷ property value × 100. Borrow $480,000 against a $600,000 property and your LVR is 80%. Lenders use it to gauge risk, and in Australia it's the number that decides whether you pay Lenders Mortgage Insurance (LMI), which is generally payable above 80% LVR.

How LVR works in Australia

LVR is the flip side of your deposit. A 20% deposit leaves an 80% loan, so 80% LVR; a 10% deposit means 90% LVR. Lenders usually calculate it against the lower of the purchase price or their own valuation, which can differ from what you paid.

Why it matters so much here:

• The 80% line. At or below 80% LVR, no LMI is payable. Push above 80% and most lenders charge LMI, a one-off premium that rises sharply as LVR climbs (80–85%, 85–90%, 90–95% bands).
• Pricing tiers. Many lenders reserve their sharpest rates for lower LVRs (e.g. 70% or 60%), so a bigger deposit can do more than just dodge LMI.
• It changes over time. As you repay principal and (hopefully) the property grows in value, your LVR falls. That's why refinancing or unlocking equity often hinges on dropping back under 80%.

Two government levers can change the picture. The First Home Guarantee lets eligible first home buyers borrow at up to ~95% LVR (a 5% deposit) with no LMI, because the Commonwealth guarantees the gap up to 20%, subject to property price caps that vary by location. And LMI, when it does apply, can be capitalised (added to the loan), which nudges your effective loan and LVR up.

Worked example

Say you're buying a $600,000 property.

Deposit	Loan amount	LVR	LMI?
$120,000 (20%)	$480,000	80.0%	None
$90,000 (15%)	$510,000	85.0%	Yes
$60,000 (10%)	$540,000	90.0%	Yes

The maths for the 10% case: $540,000 ÷ $600,000 × 100 = 90% LVR. At that band, LMI runs around 1.79% of the loan, so roughly $540,000 × 1.79% ≈ $9,666 (closer to ~$10,740 on a $600k loan at 90%). If you capitalise it, your loan becomes about $549,666 and the effective LVR ticks just over 90%.

Now track it forward. Keep the $480,000 (80%) loan at 6% over 30 years and the monthly repayment is about $2,878. If instead you'd borrowed the full $600,000 at 6% over 30 years, repayments are about $3,597/month. As you pay down principal and the property grows, say 3% a year, your LVR keeps falling, and once it's comfortably under 80% you may be positioned to refinance or access usable equity.

Model this in True Loan

True Loan calculates your LVR automatically and charts how it changes over the life of the loan: free, client-side, no login.

To model the example above:

1. Set Property value to $600,000 and Loan amount to your loan (e.g. $540,000 for a 10% deposit). True Loan shows the resulting LVR and, above 80%, an LMI estimate you can choose to capitalise.
2. Set Interest rate 6%, Term 30 years, Repayment frequency monthly.
3. Add a property growth rate (e.g. 3%) to see projected value, equity and LVR on the timeline, which is handy for spotting when you cross back under 80%.
4. To reach 80% sooner, use the Extra repayment ($/month) input to pay down principal faster, or the separate Offset balance input to model a sustained offset that reduces interest and clears the loan early. These are two distinct inputs, so set whichever you're actually planning.

Want to weigh a bigger deposit against paying LMI? Build both as separate scenarios and open them side by side at trueloan.app/compare.

Common questions and mistakes

Is LVR based on the purchase price or the valuation? Usually the lower of the two. If the bank values the property below your offer, your LVR is higher than you expected.

Does stamp duty count in LVR? No. LVR uses only the loan against the property value. Stamp duty and other upfront costs sit on top; they affect cash needed at settlement, not the ratio itself.

Capitalising LMI changes my LVR by how much? Adding the premium to the loan raises both the loan and the effective LVR slightly. True Loan shows the before/after so you can see it.

Can I get a low-deposit loan without LMI? Possibly via the First Home Guarantee (5% deposit, no LMI) if you're eligible and within the price caps. Check official sources for current limits.

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Figures here are estimates for the 2025–26 financial year and general information only, not financial or credit advice. Confirm LMI, scheme eligibility and price caps with your lender and official sources such as moneysmart.gov.au and firsthomebuyers.gov.au.