Loan-to-Value Ratio (LVR)

Definition

The Loan-to-Value Ratio (LVR) is the proportion of the property's value that is funded by a loan, expressed as a percentage. For example, if you borrow $400,000 to buy a $500,000 property, your LVR is 80%. Lenders use LVR to assess lending risk — higher LVRs are considered riskier.

Why It Matters for Property Investors

LVR determines how much you need to put down as a deposit and whether you'll need to pay Lenders Mortgage Insurance (LMI). Most lenders prefer an LVR of 80% or below for investment loans. Some investors use higher LVRs (with LMI) to leverage into the market faster, while others prefer lower LVRs for better interest rates and reduced risk. Understanding LVR helps you structure your borrowing strategy across multiple investment properties.