The calculator on this website is provided for your information only and is to illustrate scenarios. The calculator results are intended as a guide only and are an estimate or approximate guide only, based on the information you input. The calculator should not be relied upon for the purposes of entering into any legal or financial commitments.
The results should not be taken as a substitute for professional advice, and do not constitute professional advice. You should consider seeking independent legal, financial, taxation or other advice for your unique circumstances.
All reasonable care has been taken in preparing and designing the calculator; however, OwnHome Services Pty Ltd provides no warranties and makes no representation that the information provided by the calculator is correct, appropriate for your particular circumstances, or indicates you should follow a particular course of action. Calculations are for buying owner-occupied homes, and do not apply to land nor to investment properties. Other fees and charges may also apply.
OwnHome Technologies Pty Ltd is a related body corporate of OwnHome Services Pty Ltd ACN 664 492 059, ABN 77 648 597 184, which is a corporate authorised representative (#547794) of Allied Financial Consulting Pty Ltd, ACL 393845.
FAQs
Loan-to-value ratio (LVR) is the value of the property compared to the amount of borrowed money required to purchase it. It is expressed as a percentage and is used by financial institutions to assess loan applications. If you have a low LVR, a lender will consider your home loan lower-risk compared to someone with a high LVR.
It’s a good idea to keep track of your LVR while house hunting. It can show you the realistic price range your saved deposit can afford. A low LVR can also help you avoid hefty extra expenses, such as Lenders Mortgage Insurance (LMI).
Your loan options may also be affected by your LVR - some banks also have maximum LVR limits, and often high-risk LVR loans attract higher interest rates, which affects your ongoing home loan repayments.
The calculation is pretty simple. LVR is your home loan amount, divided by the lender's property valuation and multiplied by 100.
Example
You're looking at buying a property worth $500,000. You have saved up a deposit of $100,000, so you need a home loan of $400,000. The calculation would be:
Your LVR would be 80%.
Lenders like an 80% LVR - that is, with a 20% upfront deposit. At 80% LVR, most lenders do not charge LMI, as the loan is considered low risk. Avoiding LMI can save you a significant amount of money.
Home loan applications with an LVR above 80% are considered high-risk and are more likely to be declined. To the lender, receiving a smaller amount upfront means they're at an increased risk of being unable to recover the full loan amount if the borrower defaults on the loan. Additionally, these higher-risk loans are often subject to higher interest rates and borrowers with high LVR are required to pay LMI.
Lenders will usually use a bank assessment, conducted by professional evaluators, to determine the value of your property for calculating LVR. The final figure might differ from what you get from the estimated market value of real estate agents, or the final property price. The bank valuation gives the lender an idea of how much they could get back from selling the property if the borrower doesn't pay back the loan.
When your final purchase price differs from the bank valuation, banks will use the lower amount between their valuation and the home's purchase price.
If you want the best home loan deal, 80% or less is a good LVR to aim for. You'll avoid LMI and likely pay lower interest rates. If you want a lower LVR, you can either save a larger deposit or look at cheaper properties than you originally had in mind.