Understanding loan-to-value ratio (LVR).
Loan-to-value ratio (LVR) is one of the most important factors lenders consider when assessing a home loan. It measures how much of the property’s value you’re borrowing, and it plays a major role in pricing, approval decisions, and how your loan is structured.
At Lumo, we help clients understand what their LVR means, how it affects their options, and what pathways exist if they’re borrowing above the traditional 80% threshold.
What LVR is and how it’s calculated
LVR is calculated using the formula:
LVR = (Loan Amount ÷ Property Value) × 100
Example
If you buy a property valued at $700,000 and borrow $560,000:
$560,000 ÷ $700,000 = 80% LVR
Lenders use the lower of either the purchase price or valuation when determining the LVR.
Why LVR matters
Your LVR influences:
1. Approval likelihood
Higher LVRs mean more risk, which can affect lender appetite.
2. Interest rate tiers
Many lenders offer sharper pricing at lower LVRs (e.g., <70%, <80%).
3. Whether risk fees apply
Traditionally, borrowing above 80% LVR may attract lenders mortgage insurance or similar risk costs.
4. Loan structure options
Certain features or borrowing types may only be available up to specific LVR caps.
When you can borrow above 80% without LMI or risk fees
While 80% is the standard cut-off, some lenders offer pathways for borrowing more without additional fees.
These include:
First home buyer programs
A handful of lenders offer LMI-free lending above 80% for eligible first-time buyers, helping reduce upfront costs.
Professional / medico programs
Borrowers in certain professions (such as doctors, dentists, lawyers, accountants and select allied health roles) may qualify for higher LVR lending without LMI due to strong long-term earning potential.
Government-backed guarantee schemes
Schemes for first home buyers or regional buyers can allow deposits as low as 5% with no LMI, as the government provides the security guarantee.
These programs vary significantly between lenders, and eligibility criteria differ — which is why personalised guidance matters.
Factors that influence your achievable LVR
Lenders assess your scenario holistically, including:
Your income type and stability
Existing debts and credit history
Savings behaviour
Property type and location
Market conditions
Loan purpose (owner-occupied vs investment)
Different lenders have different appetite levels, so the same borrower could receive very different LVR caps depending on the lender selected.
How LVR can change unexpectedly
Two common scenarios include:
1. Valuation shortfall
If the valuation comes in lower than the purchase price, your LVR increases automatically.
This may require a higher deposit or a revised strategy.
2. Changes to loan amount
Adding renovation funds or consolidating debt into the loan increases the LVR and may change available options.
Understanding this early helps avoid surprises.
Strategies to improve your LVR position
If your LVR is higher than ideal, you may strengthen it by:
Increasing your deposit
Reducing debt before applying
Using equity from another property
Adjusting your loan structure
Choosing a lender with more flexible LVR policy
We help clients model different scenarios to see what option creates the best long-term outcome.
Let’s chat.
Want clarity on your borrowing position or whether you qualify for higher-LVR lending without extra fees? At Lumo, we compare lenders’ policies and help tailor the right path. Let’s chat.
This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.