How to Lower Your LVR
Learn how loan-to-value ratio can change, explore practical ways to reduce your LVR, and understand the trade-offs before deciding how much you want to borrow or contribute toward a property.
Lowering your LVR means reducing the loan relative to property value.
You can potentially lower LVR by borrowing less, paying down the loan, increasing your upfront contribution, or through an increase in the relevant property value while the loan remains unchanged.
What does it mean to lower your LVR?
LVR stands for loan-to-value ratio. It compares the amount borrowed with the relevant value of the property.
For example, if a property is valued at $500,000 and the loan is $400,000, the LVR is 80%.
So, lowering LVR means changing the relationship between the loan and the property value.
If you need the fundamentals first, see What Is LVR? and How to Calculate LVR .
6 ways to lower your LVR
There are several mathematical ways your LVR can decrease. The practical effect of each method is different, so the lowest possible LVR is not automatically the best financial choice for every borrower.
Borrow less
A smaller loan against the same property value produces a lower LVR from the outset.
Increase your upfront contribution
Contributing more toward the purchase can reduce the amount that needs to be financed.
Pay down the loan
Reducing the outstanding loan balance can lower LVR when the relevant property value remains unchanged.
Build property equity
As loan balances decrease relative to property value, your equity position can increase and LVR can fall.
Understand your current property value
If the relevant property value changes while the loan remains unchanged, the calculated LVR changes too.
Review the loan structure
When refinancing or restructuring, compare the proposed loan amount against the current property value.
1. Borrow less
One of the most direct ways to lower LVR is to reduce the amount you borrow.
Suppose a property is valued at $600,000.
85% LVR
80% LVR
The property value has not changed. The LVR falls because the loan amount falls.
2. Increase your upfront contribution
When purchasing a property, contributing more money upfront can reduce the amount that needs to be borrowed.
For example, a $500,000 property financed with a $450,000 loan has a 90% LVR. If the loan were instead $400,000, the LVR would be 80%.
Use the LVR & Deposit Calculator to compare different target LVR scenarios.
3. Pay down your loan
If your property value stays the same, reducing the outstanding loan balance reduces your LVR.
Imagine a property valued at $800,000 with a loan balance of $600,000.
Actual loan repayment effects depend on the loan structure, interest, repayment schedule and other terms.
4. Build equity relative to your loan
Equity is broadly the difference between property value and outstanding loan balance.
For example:
Use the LVR & Equity Calculator to explore the relationship between your loan, property value, LVR and estimated equity.
5. Changes in property value can change LVR
LVR is calculated using both the loan and property value. Therefore, if the relevant property value changes while the loan remains unchanged, the calculated LVR also changes.
For example, suppose the loan is $400,000.
$400,000 ÷ $500,000 = 80% LVR
$400,000 ÷ $550,000 ≈ 72.7% LVR
This does not mean property values can or should be assumed to increase. Property values can also fall, which can increase LVR if the loan balance does not fall proportionally.
6. Review your LVR when refinancing
Refinancing can be an opportunity to review your current loan-to-value position and compare it with a proposed new loan.
If the new loan is smaller relative to the relevant property value, the resulting LVR will be lower.
But a lower refinance LVR does not automatically mean refinancing is financially beneficial. Compare interest rates, fees, loan features, remaining term, penalties and other costs.
Calculate Refinance LVR →How low should your LVR be?
There is no universal target LVR that is right for every borrower.
A lower LVR generally means less borrowing relative to property value. However, achieving a lower LVR may require a larger upfront contribution or additional repayments.
The decision should consider the complete financial picture, including:
- How much cash you want to keep available.
- The amount you actually need to borrow.
- Interest and other loan costs.
- Potential mortgage insurance requirements.
- Your expected holding period.
- Your future borrowing or refinancing plans.
For a deeper comparison of LVR levels, read What Is a Good LVR?
Can lowering LVR reduce mortgage insurance?
It can affect mortgage insurance requirements or pricing in some lending arrangements, but there is no universal rule.
Mortgage insurance requirements vary by country, lender, insurer, loan type, property and borrower circumstances.
This is why a lower LVR should not automatically be described as guaranteeing that mortgage insurance will not apply.
Learn more: LVR vs LMI .
See what different LVR levels look like
Our percentage guides explain the mathematics and practical considerations at specific LVR levels.
Calculate your current LVR
Before deciding how to lower your LVR, calculate your current position. Then compare it with a target LVR.
Continue the LVRcalc guide
This guide is part of the LVRcalc content cluster. Use the related resources below to move from LVR fundamentals to calculations, comparisons and specific LVR levels.
Core LVR guides
LVR glossary
Need a definition? Visit the LVR Glossary for key terms including loan-to-value ratio, equity, deposit and mortgage insurance.
Start with your current numbers
Calculate your current LVR first. Then you can compare what happens if you reduce the loan or target a different LVR.
Calculate My LVR →Frequently asked questions
How can I lower my LVR?
You can potentially lower your LVR by borrowing less, increasing your upfront contribution, paying down the loan, or through changes in the relevant property value while the loan remains unchanged.
Does paying off my mortgage lower my LVR?
Generally, reducing the outstanding loan balance lowers LVR if the relevant property value remains unchanged.
Can a higher property value lower my LVR?
Mathematically, yes. If the relevant property value increases while the loan remains unchanged, the calculated LVR decreases. Actual lending valuations and property values should not be assumed and can also move downward.
Does putting down a larger deposit lower LVR?
In a simplified purchase calculation, yes. A larger upfront contribution generally means a smaller loan, which produces a lower initial LVR.
Is a lower LVR always better?
Not necessarily. A lower LVR means less borrowing relative to property value, but achieving it may require more money upfront or additional repayments. The appropriate balance depends on the complete financial situation.
Can lowering my LVR remove mortgage insurance?
It may affect mortgage insurance requirements or pricing in some lending arrangements, but there is no universal rule. Requirements vary by country, lender, insurer, loan type and borrower circumstances.
What is a good LVR to aim for?
There is no single ideal LVR for everyone. A suitable target depends on how much you need to borrow, available cash, loan costs, lender requirements and your longer-term plans. See What Is a Good LVR? for a detailed comparison.
How do I know my current LVR?
Divide the relevant loan amount by the relevant property value and multiply by 100. You can also use the LVR Calculator to calculate it.
Important information
LVRcalc provides general educational information and calculator estimates. This page does not provide financial, lending, legal or tax advice and does not guarantee loan approval, interest rates, mortgage insurance availability or lender requirements.
LVR calculations and lending criteria can vary by country, lender, property, valuation method, loan type and borrower circumstances. Property values can rise or fall and should not be assumed to increase.
Confirm important borrowing, valuation and insurance requirements with the relevant lender or a qualified professional.
