LVR Explained: Why 80% Is the Magic Number

Key takeaways

• LVR uses the lender's valuation, not the price you paid — a low valuation raises your LVR even if you paid market price.
• At or below 80% you generally avoid LMI and access the sharpest advertised rates.
• Pricing typically steps at 60%, 70%, 80%, 90% and 95%, so a small extra deposit that crosses a band can be worth far more than the same amount below it.
• LMI protects the lender, not you, even though you pay for it.

How is LVR calculated?

LVR = loan amount ÷ property value × 100.

Two points catch buyers out. First, lenders use their own valuation, which can come in below the contract price — and LVR is then calculated on the lower figure. Second, your deposit must also cover stamp duty and costs, so the cash you need is well above the deposit itself.

Why does 80% matter so much?

Historical loss data shows default losses rise sharply once equity thins, so above 80% lenders require mortgage insurance to cover the shortfall if a property is sold for less than the outstanding debt.

Crossing below 80% typically delivers three things at once: no LMI premium, access to the sharpest advertised rates, and a much wider field of lenders — which itself improves your negotiating position.

What if you cannot reach 20%?

Several routes exist, each with trade-offs:

• Pay the LMI. Sometimes rational — if prices are rising faster than you can save, waiting can cost more than the premium.
• Guarantor or family pledge. A parent offers equity in their property as additional security to bring the effective LVR under 80%. It exposes the guarantor to real risk.
• Government schemes. Places under the 5% deposit scheme allow eligible buyers to purchase without LMI, subject to caps and eligibility.
• Professional waivers. Some lenders waive LMI to 90% LVR for specified occupations such as medical practitioners, lawyers and accountants.

Frequently asked questions

Does LVR change over time?

Yes. It falls as you repay principal and as the property appreciates. Once you believe you are below 80%, ask your lender for a revaluation — you may be able to have LMI-related pricing removed or negotiate a better rate.

Can I borrow more than 95%?

Rarely in the mainstream market without a guarantor or an eligible government scheme. A small number of lenders will capitalise the LMI premium on top of a 95% loan, taking the total above 95%, but appetite is limited.

Is LMI refundable if I sell quickly?

Some insurers offer a partial refund if the loan is discharged within the first one to two years, though many have withdrawn this. Check the policy terms at the time you take out the loan rather than assuming.

Related reading

• Offset Account vs Redraw: The Real Difference
• Fixed vs Variable in a Hiking Cycle: The 2026 Decision Framework
• Stress-Testing Your Own Budget at +3%

Sources

• Prudential Practice Guide APG 223 Residential Mortgage Lending — APRA
• Lenders mortgage insurance explained — ASIC Moneysmart