LVR — loan-to-value ratio — is one of the first numbers a lender looks at, and one of the most useful for an investor to understand. It expresses your loan as a percentage of the property's value. Borrow $400,000 against a $500,000 property and your LVR is 80%.
The lower your LVR, the more of the property you own outright and the less risk the lender is carrying. That single ratio quietly governs how much you can borrow, whether you pay lender's mortgage insurance, and how much of a price fall you could absorb before you owe more than the property is worth.
The formula
Loan-to-value ratio
Loan amount ÷ property value × 100
The current loan balance divided by the property's current value. As you pay down the loan or the property appreciates, your LVR falls — which can unlock refinancing, better rates, or the ability to borrow against the equity.
The flip side: your equity
100% − LVR
Whatever isn't funded by debt is your equity share. An 80% LVR means 20% equity. The two always add to 100%, so watching your LVR fall is the same as watching your equity grow.
Why 80% is the number everyone talks about
Lenders treat 80% LVR as a key line. Borrow at or below it and you typically avoid lender's mortgage insurance (LMI) — a one-off cost that protects the lender, not you, and can run into many thousands of dollars. Push above 80% and LMI usually applies, rising steeply the closer you get to a 95% LVR.
A higher LVR lets you buy with a smaller deposit and control more property with less of your own cash — powerful when values are rising. The trade-off is thinner equity, higher repayments, LMI, and less room to move if prices fall. LVR is the dial where the ambition of leverage meets the reality of risk.
A worked example
You buy a $700,000 property with a $560,000 loan — an LVR of 80%, so no LMI. Five years later you have paid the loan down to $500,000 and the property has grown to $820,000. Your LVR is now $500,000 ÷ $820,000 = 61%.
That fall from 80% to 61% is equity you can potentially borrow against to fund the next purchase — without selling a thing. Falling LVR is how many investors finance their second and third properties.
Work out your LVR
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