- LVR is the loan amount divided by the property’s value.
- LMI usually applies to residential loans above 80% LVR.
- Government guarantees, family guarantees and some professional packages can avoid LMI.
What LVR means
LVR is your loan amount as a percentage of the property’s value. If you borrow $640,000 to buy an $800,000 property, your LVR is 80%. Lenders use their own valuation, or the lower of the valuation and the purchase price.
Why LVR matters
- Lower LVRs often get lower interest rates.
- Above 80%, most lenders charge lenders mortgage insurance on residential loans.
- Each lender sets a maximum LVR for each type of loan and property. Commercial property is usually capped at lower LVRs than residential property.
What LMI is
Lenders mortgage insurance protects the lender, not you, if a loan is not repaid and the property sells for less than the debt. It is usually a one-off premium that can be paid upfront or added to the loan. The cost increases with both the LVR and the size of the loan, and can range from a few thousand dollars to tens of thousands.
Ways to avoid or reduce LMI
- Save a deposit of 20% or more, plus purchase costs.
- Use the Home Guarantee Scheme if you are eligible.
- Use a family guarantee, where a relative offers equity in their property as extra security.
- Some lenders waive LMI for certain professionals, such as doctors, lawyers and accountants, up to a higher LVR.
Using LVR to plan
If you already own property, your LVR also shows how much equity you could access. Our LVR calculator shows how much more you could borrow at 60%, 70%, 80% and 90% LVR across one or more properties.
This article is general information only and does not take into account your objectives, financial situation or needs. It is not credit, tax or financial advice. Lender criteria and government schemes change, so check current details and seek advice before acting.