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Article | 3 minute read

What’s a Loan to Value Ratio (LVR)?

Loan to Value Ratio is one of those things you’ll hear about a lot in the world of home loans. It’s important because it may affect your borrowing power. So what is LVR? 

Loan to Value Ratio (LVR) is how lenders describe the amount you need to borrow to buy a particular property. In a nutshell: it’s the amount you need to borrow, calculated as a percentage of the property’s 'lender-assessed value'.

The ‘lender-assessed value’ is basically your lender’s valuation of the property.

Let’s break it down a bit more. Here’s an example: 

  • Let’s say your lender values the property at $500,000
  • Let’s also say you have a $100,000 deposit
  • This means you need to borrow $400,000 to buy the property. 

Your LVR would be calculated like this:

$400,000 ÷ $500,000 = 80%

In the above example, we’ve simplified things by leaving out some of the fees and costs you might have to pay – but more about those later.

So now you know how your LVR is calculated. So far, so good. But what does it mean when it comes to your borrowing power?

Loan to Value Ratio, or LVR, is the amount you’re borrowing for a home loan compared to the value of the property you plan to buy.  The value of the property is assessed, and this may be different to the price you paid for your property.

Let’s break down how LVR is calculated.

Let’s say your property is valued at $500,000 dollars…and let’s say you have a $100,000 dollar deposit - this is also referred to as your equity.

This means you need to borrow $400,000 dollars to buy the property.

Your LVR would be calculated like this:

$400,000 dollars divided by $500,000 dollars equals 80%.

In this example, we haven’t included some of the fees and costs you might have to pay but you get the idea.

Generally, the lower the LVR, the less the risk for you and your lender. So, as your property increases in value and your loan balance decreases, your LVR will continue to decrease, and that’s a good thing!

So, before you plan on buying your property, you should first try and save at least 20% of the purchase price - this will mean that your LVR doesn’t tip over 80%.

If your deposit is less than 20% and your LVR does tip over 80%, your lender takes on more risk.   In this case, you may be required to take out Lenders Mortgage Insurance or have your home loan secured by a guarantee to protect the lender.

For more information contact us at ANZ.

Generally, the lower the LVR, the better

Why is a low LVR considered better? From the lender’s perspective, a lower LVR generally carries less risk.

A lower LVR may also be good news because you’ll be off to a head start when it comes to owning your home. If your LVR is lower, you will have more equity in your home right from the start. (Equity is the market value of your property, minus the amount of your loan you still have to repay.)

Another potential benefit of a lower LVR is that you may be able to get a lower home loan interest rate than the interest rate that would be applicable with a higher LVR. With an ANZ Simplicity PLUS home loan, interest rates start from  ( comparison rate) with special offer discountdisclaimerwhen borrowing 70% or less of the property value.disclaimer

See Simplicity PLUS home loan rates

What happens when your LVR is over 80%?

When it comes to LVR, 80% is widely considered the tipping point. As soon as your LVR tips over 80%, the cost of getting a home loan may start to increase. This is because borrowers with a LVR of over 80% may be required to pay for Lenders Mortgage Insurance (LMI)

LMI protects the lender if you default on your home loan and there’s a shortfall following the sale of the property. Even though you’ll be the one paying the insurance premium, LMI won't provide you with protection. It only protects the lender.

Generally speaking, the higher your LVR, the more LMI will cost.

You need to make sure you understand LMI before deciding if it’s a good idea for you. Everyone’s circumstances are different, so learn as much as you can and consider the alternatives.

Read our article on Lenders Mortgage Insurance to learn more about ‘LMI’, ‘shortfall’ and the possible consequences.

A word about fees and costs

There are a few upfront fees and costs you may have to pay when buying a house. If you haven’t taken these costs into account, you may end up having less money left for your deposit. The less you have for your deposit, the higher your LVR will be.

Read our article on the unexpected costs of buying a house to find out more.

To sum up 

  • Loan to Value Ratio (LVR) is calculated by dividing the loan amount by the lender-assessed value of the property.
  • Generally speaking, most lenders consider a LVR of 80% or more as being risky.
  • If the LVR is higher than 80%, you may need to pay for Lenders Mortgage Insurance.

Loan to Value Ratio Calculator

You can apply for a discounted interest rate based on your Loan to Value Ratio (LVR). Higher discounts may apply if your LVR is 80% or less.

Your LVR is the amount you're looking to borrow, divided by the value of the property you want to buydisclaimerand expressed as a percentage. For instance, if you're borrowing $400,000 to buy a $500,000 property, your LVR would be 80%.

Extra tips and tools

Home owner tips and guides

Get practical tips to help you in your property journey, whether you're just starting out, ready to buy, or trying to sell. 

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Download free ANZ Property Profile Reports

Get a price range estimatedisclaimerof how much a property could sell for, with options to estimate equitydisclaimerif you already own property. 

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Connect with our home loan specialists or apply

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Our home loan specialists can help you with pre-approval,disclaimer a new home loan, refinancing or topping up your existing home loan. 

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You can also chat to an ANZ accredited broker for help with your home buying, investing or refinancing needs.

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The information on this page does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you and read the relevant terms and conditionsProduct Disclosure Statement and the ANZ Financial Services Guide (PDF) before acquiring any product. 

Applications for credit subject to approval. Terms and conditions available on application. Fees and charges apply. Australian credit licence number 234527.

The rate shown is the Simplicity PLUS Home Loan index less the applicable special offer discount. Rates are subject to change. Eligibility criteria apply to special offer discounts, including $50,000 or more in new or additional ANZ lending. Offers can be withdrawn or changed anytime.


Property value is ANZ's valuation of the security property and may be different to the price you pay for a property.


Estimated LVR is based on the limited information provided and is for illustrative purposes only. Estimated LVR is rounded up to one decimal place. For example, an estimated LVR of 80.01% will be rounded up to 80.1%. The value of the property (as assessed by ANZ) may differ from your estimate. It does not constitute a quote or an offer for credit. To apply for an ANZ home loan you must complete an application. All applications for credit are subject to ANZ's credit approval criteria.


A property price range estimate is an estimate only. It is based on certain available information and is not a valuation of a property or guarantee of its market value or future sale price. Price ranges and predictions may change daily and the actual sale price (if the property is sold) may be different.


Equity in your home is calculated as the difference between the value of your home and the amount you have left to pay on your home loan at the time the calculation is performed. Estimated equity ranges are estimates only and may not be available for all properties. They are based on certain available information and dependent on the current loan amount data that you input into your ANZ Property Profile Report request form, calculated against the price range estimate. Estimated equity ranges are not confirmation as to the equity you may have in a property or a guarantee of the equity available should a property be sold.


ANZ may provide pre-approval (also known as approval in principle or conditional approval) to eligible customers who apply for an ANZ home loan and complete an application form and satisfy any other applicable requirements. Pre-approval is an approval for a loan subject to conditions being met, including that security is satisfactory to ANZ. Australian Credit Licence Number 234527.


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