Understanding 85% LVR
An 85% loan-to-value ratio means the loan represents 85% of a property's value. Learn how to calculate 85% LVR and understand what it means for loan amounts, deposits, equity, mortgage insurance and refinancing.
What does 85% LVR mean?
LVR compares a loan amount with the value of the property securing the loan.
An 85% loan-to-value ratio
An 85% LVR means the loan amount is equal to 85% of the property's value.
The remaining 15% represents the mathematical difference between the property's value and the loan amount.
For example, a property valued at $500,000 with a $425,000 loan has an LVR of 85%.
85% LVR Formula
To calculate a loan amount at a target LVR of 85%, multiply the property value by 0.85.
How is 85% LVR calculated?
Once you know the property value and loan amount, calculating LVR is straightforward.
Divide the loan amount by the property value and multiply by 100:
Calculate the loan amount at 85% LVR
Enter a property value to see the corresponding 85% loan amount and 15% difference.
How much is an 85% loan?
At a target LVR of 85%, the loan amount is 85% of the property value.
The remaining 15% is the mathematical difference between the property value and loan amount.
This calculation is illustrative and does not indicate lending approval or borrowing capacity.
85% LVR examples by property value
The LVR remains 85%, while the corresponding loan amount changes with the property value.
| Property Value | 85% Loan | 15% Difference |
|---|---|---|
| $300,000 | $255,000 | $45,000 |
| $400,000 | $340,000 | $60,000 |
| $500,000 | $425,000 | $75,000 |
| $600,000 | $510,000 | $90,000 |
| $750,000 | $637,500 | $112,500 |
| $1,000,000 | $850,000 | $150,000 |
What does 85% LVR mean for a deposit?
At an 85% LVR, the loan represents 85% of the property's value and the mathematical difference is 15%.
Example property value.
85% of the property value.
15% of the property value.
In a simplified calculation, the difference at 85% LVR is 15% of the property value. This should not automatically be treated as the complete cash required to purchase a property. Taxes, legal costs, valuation charges, insurance, lender fees and other expenses may also apply.
Explore Deposit Calculations →85% LVR and equity
If the outstanding loan equals 85% of the property's current value, the mathematical difference is 15%.
Suppose a property is currently valued at $500,000 and the outstanding loan balance is $425,000.
In this simplified example, the difference represents 15% of the property's value.
Calculate Your Equity →Equity can change over time
Equity depends on the relationship between the property's current value and outstanding debt.
If the property value increases or the loan balance decreases, the resulting LVR may fall. If the property value decreases or debt increases, the LVR may rise.
Use a current property value and current loan balance when calculating an updated position.
Does 85% LVR affect mortgage insurance?
Mortgage insurance requirements vary by country, lender, loan type and borrower circumstances.
An 85% LVR may therefore be relevant when comparing different borrowing scenarios, but there is no universal rule that applies to every lender or jurisdiction.
Explore LVR & Insurance →LVR and mortgage insurance are different
Mortgage insurance, where applicable, is a separate lending consideration and should be evaluated using the requirements of the applicable lender and jurisdiction.
85% LVR when refinancing
A proposed refinance loan can also be expressed as an LVR based on the property's current value.
Example
If a property is valued at $800,000 and the proposed new loan is $680,000:
Refinancing depends on more than LVR
An 85% LVR describes the relationship between a proposed loan and property value. It does not guarantee refinance approval, interest rates, fees or any particular lending outcome.
Compare Refinance LVR →Is 85% LVR considered a good LVR?
Whether 85% LVR is suitable depends on the borrower's circumstances, lender criteria, property and loan structure.
What an 85% LVR represents
At 85% LVR, the loan represents 85% of the property's value, while the mathematical difference between the loan and property value is 15%.
This makes 85% a useful reference point when comparing different LVR scenarios.
Higher LVR means a larger loan relative to value
Compared with a lower LVR, an 85% LVR represents a larger loan relative to the property's value. The practical implications depend on the applicable lender and loan product.
85% LVR compared with other levels
Comparing percentages helps show how the loan amount changes for the same property value.
Related LVR guides
Explore the fundamentals behind loan-to-value calculations and related property finance concepts.
Key terms related to 85% LVR
Learn the terminology commonly used when discussing LVR, property value and borrowing.
85% LVR FAQs
What does 85% LVR mean?
An 85% LVR means the loan amount is equal to 85% of the property's value. The mathematical difference between the property value and loan amount is 15%.
What is 85% LVR on a $500,000 property?
An 85% LVR on a $500,000 property corresponds to a $425,000 loan because $500,000 × 0.85 equals $425,000.
What is the deposit for an 85% LVR?
In a simplified calculation, an 85% loan means the mathematical difference is 15% of the property value. Actual cash required for a purchase may be different because taxes, fees and other costs can apply.
Is 85% LVR a good LVR?
Whether 85% LVR is suitable depends on the borrower's circumstances, loan structure, property and applicable lender criteria. LVR is only one part of a lending assessment.
Does 85% LVR affect mortgage insurance?
It can be relevant to mortgage insurance considerations, but requirements vary by country, lender and loan product. There is no universal mortgage-insurance rule based solely on an 85% LVR.
How much equity is represented by 85% LVR?
If the outstanding loan produces an 85% LVR, the mathematical difference between the loan and property value is 15% of the property's value. Actual equity should be calculated using the current property value and outstanding loan balance.
Can I refinance at 85% LVR?
A proposed refinance loan can have an 85% LVR if the new loan amount equals 85% of the property's current value. Whether refinancing is available depends on applicable lending criteria and individual circumstances.
Is 80% LVR lower than 85% LVR?
Yes. An 80% LVR means the loan represents 80% of the property's value, while an 85% LVR means it represents 85%. For the same property value, the 85% LVR corresponds to a larger loan amount.
What is your current LVR?
Enter your property value and loan amount to calculate your current loan-to-value ratio.
Calculate My LVR →