Guide · lending basics

What is LVR, and how do you calculate it?

LVR is the loan to value ratio: all debt secured against a property, divided by the property's value, as a percentage. A $450,000 total debt against a $750,000 property is 60% LVR. It is what decides how much can be borrowed, and it is calculated on total debt rather than on the new loan alone.

The calculation

Total debt secured by the property, divided by the property's value, times one hundred. The word doing the work is total: LVR counts everything secured against the property, not only the loan being applied for. This is the single most common error when people estimate what they can raise.

Property value	Existing mortgage	New loan	Total debt	LVR
$800,000	—	$400,000	$400,000	50%
$750,000	$300,000	$150,000	$450,000	60%
$900,000	$400,000	$320,000	$720,000	80%
$1,200,000	$700,000	$260,000	$960,000	80%
$600,000	$480,000	—	$480,000	80% — already at the ceiling

Working it backwards: what can I actually borrow?

This is the version most people want. Multiply the value by the ceiling, then subtract what is already owing. What is left is what is available.

Security	Value	Ceiling	Owing	Available
Home, owned outright	$1,100,000	80% — $880,000	—	$880,000
Home with a mortgage	$900,000	80% — $720,000	$400,000	$320,000
Investment unit	$620,000	80% — $496,000	$310,000	$186,000
Commercial premises	$1,400,000	70% — $980,000	$500,000	$480,000
Home and unit combined	$1,520,000	80% — $1,216,000	$710,000	$506,000

Indicative only, and value means a lender's assessment of the security rather than an agent's appraisal or a hope.

Why the ceiling differs by property type

An LVR ceiling is not a judgement about the quality of a property. It is a judgement about how confidently and how quickly the debt could be recovered if it ever had to be. That is why the ceilings line up with liquidity rather than with value:

Residential in a town or city — 80%. The deepest market in Australia. Many buyers, comparable sales everywhere, predictable sale periods.
Commercial — 70%. Fewer buyers, longer campaigns, and value that depends on a lease and a tenant as well as on the building.
Large acreage and rural — lower again. A small buyer pool and sale periods measured in months rather than weeks.
Vacant land — lower than an improved property. Nothing produces income from it while it is held, and zoning and services drive the market more than location does.
Lower-value properties. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

What LVR does and does not decide

LVR sets the maximum. It is not the whole decision. Two files at the same LVR can be priced differently and one can be declined, because the other inputs still matter: where the lender ranks on the title, how the loan is repaid, how long it runs, and what the property actually is. Conversely, a strong LVR does not rescue a file with no credible exit — a loan with nothing to repay it is a problem deferred, whatever the ratio says.

How the price is built sets out where LVR sits among the things that move it, and lending against property covers what can be offered as security.

If the number was not the whole problem

If you have worked out your LVR, you have worked out roughly what you can raise against your property — and most people do that because they need the money for something with a date on it.

If you are reading this because money is tight, it may be that what you actually need is fast business finance — and HomeSec can lend with very few qualification criteria. All you need is sufficient equity in real estate and a business purpose: no financials, no valuation, no credit score threshold, funded in as little as 24 hours from a clean, complete scenario. Best of all, the first six months can come with no requirement to make any payment.

That's the HomeSec Advantage.

Questions people ask alongside this one

What does LVR mean?

Loan to value ratio: the loan divided by the value of the property securing it, expressed as a percentage. A $400,000 loan against an $800,000 property is 50% LVR. It is the single most important number in secured lending, because it describes how much of the property's value would have to be recovered for the lender to be repaid.

How do I calculate LVR?

Divide the total debt secured by the property by the property's value and multiply by 100. Total debt means everything secured against it, not just the new loan — an existing mortgage of $300,000 plus a new loan of $150,000 against a $750,000 property is $450,000 over $750,000, which is 60%.

What LVR does HomeSec lend to?

Up to 80% on residential security and 70% on commercial. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000. Those ceilings are inclusive of anything already secured against the property, which is what people most often get wrong when they estimate what is available.

Does a lower LVR get a better rate?

Generally yes, everywhere in secured lending. A lower LVR means a larger buffer between the debt and the value of the security, so the loan is less exposed to a fall in the market or to the costs of a sale. It is one of the small number of things that genuinely moves pricing on a private loan.

Is LVR based on the purchase price or the valuation?

On a purchase, lenders use the lower of the price and the valuation, because paying above market does not create value. On a refinance or an equity release it is based on the assessed value. HomeSec assesses value itself rather than ordering a sworn valuation, which removes both the fee and the week it takes.

Why is commercial property assessed at a lower LVR than residential?

Because it takes longer to sell and the pool of buyers is smaller. A suburban house has a deep, liquid market; a specialised industrial building in a regional town does not. The LVR ceiling is a measure of how confident a lender is of recovering the debt from a sale, so it moves with liquidity rather than with quality.

What happens if my LVR is above the ceiling?

Either the loan amount comes down, or more security is added. Adding a second property is the usual answer — the values and the debts are added together and the ceiling applied to the combination, which often creates room that neither property had on its own.

Does LMI apply?

Lenders mortgage insurance is a feature of regulated home lending at high LVRs, not of business lending secured by property. HomeSec does not charge it and does not require it.

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Reviewed by Jason Brockmuller, Joint Chief Executive