What Is LVR? Loan to Value Ratio Explained
How your deposit size determines your rate, when LMI applies, and how to move to a better tier.
How to calculate LVR
LVR — Loan to Value Ratio — is your loan amount divided by the property's value, expressed as a percentage.
Formula
LVR = Loan amount ÷ Property value × 100
Property value: $700,000
Deposit: $140,000 (20%)
Loan amount: $560,000
LVR: $560,000 ÷ $700,000 = 80%
A lower LVR means you own a larger share of the property relative to what you owe — which reduces risk for the lender and usually earns you a lower interest rate.
How LVR affects your interest rate
Most lenders publish rate tiers by LVR. The lower your LVR, the lower the rate you qualify for. Here's how Macquarie's rate tiers look across the full LVR range:
| LVR | Macquarie OO P&I rate | Deposit needed on $700k property |
|---|---|---|
| ≤60% | 5.84% p.a. | $280,000+ (40%) |
| ≤70% | 5.84% p.a. | $210,000+ (30%) |
| ≤80% | 5.89% p.a. | $140,000+ (20%) |
| ≤90% | 6.09% p.a. | $70,000+ (10%) — LMI likely |
| ≤95% | 6.89% p.a. | $35,000+ (5%) — LMI applies |
Macquarie rates verified May 2026. Full Macquarie review →
The 80% threshold — LMI and rate jumps
The most important LVR threshold is 80%. Above this, two things typically happen:
Lenders Mortgage Insurance (LMI)
LMI protects the lender if you default. You pay the premium — typically 1–3% of the loan amount. On a $600,000 loan at 90% LVR, LMI can cost $10,000–$20,000+. It is usually added to the loan, increasing your total debt.
Higher rate tier
Lenders charge more for >80% LVR loans because the risk is higher. The rate premium varies by lender but is often 0.20–1.05% p.a. above the sub-80% rate for the same loan.
The government's First Home Guarantee scheme lets eligible first home buyers borrow up to 95% LVR without paying LMI, with the government guaranteeing up to 15% of the loan.
LVR at purchase vs over time
Your LVR at the time you take out the loan is your startingLVR. It changes over time as you make repayments and as the property value changes.
If you originally borrowed at 88% LVR and a few years of repayments and property growth have brought your LVR below 80%, you may be able to refinance into a lower rate tier — and avoid paying LMI on the new loan since you're now under 80%.
Lenders typically require a new property valuation when you refinance. If the property has grown in value, the valuation will confirm your improved LVR and unlock the lower rate.
LVR tiers across current lenders
| Lender | Best OO P&I rate | Max LVR published |
|---|---|---|
| Pacific Mortgage Group | 5.59% at ≤80% | 80% |
| Unloan | 5.69% at ≤80% | 90% |
| Reduce Home Loans | 5.94% at ≤80% | 80% |
| Macquarie | 5.84% at ≤70% | 95% |
| HSBC | 5.99% at ≤60% | >80% (higher rate) |
| loans.com.au | 6.04% at ≤90% | 90% |
FAQs
What does LVR mean on a home loan?
LVR stands for Loan to Value Ratio. It is the amount you are borrowing expressed as a percentage of the property's value. For example, if you are buying a $700,000 property with a $140,000 deposit and borrowing $560,000, your LVR is 80% ($560,000 ÷ $700,000).
How does LVR affect your home loan interest rate?
Most lenders charge higher interest rates for higher LVRs. Borrowers with an LVR of 60% or less typically get the sharpest rates because the loan is lower risk for the lender. Rates usually step up at 60%, 70%, 80%, and 90% LVR thresholds. Macquarie, for example, charges 5.84% p.a. at ≤70% LVR and 6.89% p.a. at ≤95% LVR.
What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance (LMI) is insurance that protects the lender — not you — if you default on the loan. It is typically required when your LVR exceeds 80% (i.e., your deposit is less than 20%). LMI can cost tens of thousands of dollars and is usually capitalised into the loan, increasing your total debt.
Can you get a home loan with less than 20% deposit?
Yes. Most lenders will lend up to 95% LVR, but you will pay LMI and a higher interest rate. Some lenders (like Macquarie) go to 95% LVR; others cap at 80% or 90%. The government First Home Guarantee scheme allows eligible first home buyers to borrow up to 95% LVR without paying LMI, with the government guaranteeing the gap.
How do you improve your LVR?
You can improve (lower) your LVR by saving a larger deposit before purchasing, making extra loan repayments over time to reduce the loan balance, or benefiting from property value growth which increases the property value side of the ratio. Refinancing when your LVR has improved can unlock a lower rate tier.
Related
- Comparison rate explained — what's included and when it misleads
- Fixed vs variable rate — which suits your situation
- Offset account explained — how to reduce the interest you pay
- Best Home Loans 2026 — top picks by use case
- Compare all home loan rates
This page is for general information only. LMI costs and eligibility vary by lender. Confirm current rates, LVR requirements, and LMI costs with each lender before applying.