Loan-to-value ratio is the loan divided by the property value, as a percentage. It is the single number Australian lenders use most.
Two thresholds matter: 80%, above which lenders mortgage insurance generally applies, and 90–95%, above which many lenders will not go at all.
Works out the loan-to-value ratio: how much is borrowed as a percentage of what the property is worth.
Property value
The lender uses its own valuation, not the price you paid. Where they differ — and on a competitive purchase they often do — the lender’s figure is the one your LVR is assessed on.
At or below 80%, no lenders mortgage insurance. This is the threshold most buyers are aiming at, and it is why a deposit of exactly 20% is the conventional target.
Above 80%, LMI applies. It is an insurance policy protecting the lender, paid by you, usually capitalised into the loan. The premium rises steeply with LVR — the difference between 85% and 90% is much more than the difference between 80% and 85%.
LVR also affects the interest rate offered. Many Australian lenders price in tiers, with their sharpest rates reserved for borrowers at or below 60–70%.
Every figure below is computed by the same calculator on this page, from the inputs described. Nothing here is typed in by hand, so an example cannot disagree with the tool.
Exactly at the threshold. A valuation that comes in lower than the price would push this above 80% and trigger LMI on a purchase that was planned without it.
Comfortably above the threshold. LMI applies, and at this level the premium runs to five figures.
The loan amount divided by the property value, expressed as a percentage. That is the whole calculation.
The simplicity is the point: this is the number the lending decision turns on, and knowing where you sit against 80% before you apply changes what you should be applying for.
One property, one loan
Cross-collateralised lending across several properties is assessed on a combined basis and is not modelled here.
LMI is not added to the loan
If the premium is capitalised, the actual loan is higher and so is the resulting LVR — occasionally enough to push it into a higher pricing tier.
It does not price LMI
Premiums are set by the insurer from tables that vary by lender, LVR band and loan size. Your lender or broker can quote the actual figure.
The lender’s valuation governs
A valuation below the contract price is a common and expensive surprise. Your LVR is calculated on their number, not yours.
Works out gross equity in a property, and how much could be released while staying within a loan-to-value ratio you choose.
Adds transfer duty to your deposit and the other upfront costs, to show the cash you need to complete a purchase.
Works out the regular repayment on a home loan, and what it adds up to in interest over the full term.
Compares your current loan with a refinance offer over the same remaining term, and shows how long the switching costs take to recover.
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