How Does the LVR (Loan-to-Value Ratio) Influence What a Broker Can Get for Me in Victoria?

By Lowest Interest Rates Australia

Introduction

When I bought my first home in Melbourne, I remember my broker asking, “What’s your LVR looking like?” I nodded like I knew exactly what that meant… then immediately Googled it in the car park. Turns out, it was one of the most important numbers in my entire home loan journey.

Your LVR, or Loan-to-Value Ratio, can make or break your loan options. It determines how much you can borrow, what interest rate you’re offered, whether you’ll need Lenders Mortgage Insurance (LMI), and even which banks will consider your application. It’s one of those behind-the-scenes figures that brokers obsess over — and for good reason.

In this article, I’ll explain exactly what LVR is, how it’s calculated, why it matters to lenders, and most importantly, how a broker in Victoria can use it to get you a better deal, better rate, and better overall strategy for your home ownership goals.

Table of Contents

1. What Is LVR (Loan-to-Value Ratio)?
2. How LVR Is Calculated
3. Why LVR Matters to Lenders and Brokers
4. Understanding Common LVR Tiers
5. How Your LVR Affects What a Broker Can Get for You
6. How to Reduce Your LVR Before Applying
7. The Connection Between LVR and Lenders Mortgage Insurance (LMI)
8. Real-World Examples of LVR in Action
9. Case Study: How a Broker in Victoria Negotiated a Better Deal
10. Final Thoughts – Work with Lowest Interest Rates

What Is LVR (Loan-to-Value Ratio)?

Let’s start with the basics. Your LVR (Loan-to-Value Ratio) represents the percentage of your property’s value that you’re borrowing. It’s how lenders measure your risk as a borrower — the higher the LVR, the more you’re borrowing compared to what the property is worth, and the riskier the loan is considered.

In other words:

LVR = (Loan amount ÷ Property value) × 100

So, if you’re buying a $600,000 home and you have a $120,000 deposit, you’ll need to borrow $480,000. Your LVR is:

($480,000 ÷ $600,000) × 100 = 80%

That means you’re borrowing 80% of the property’s value — a common and favourable figure that most lenders are happy with. Anything above that (e.g. 85%, 90%, or 95%) is considered higher risk, which means stricter conditions, possible extra fees, and potentially higher interest rates.

How LVR Is Calculated

Lenders don’t just take your word for the property’s value. They base the calculation on the lower of the purchase price or the bank’s valuation.

For example:

• If you agreed to buy a property for $650,000 but the lender’s valuation comes back at $630,000, they’ll use $630,000 as the benchmark.
• This means your LVR increases, because your deposit now covers a smaller portion of what the bank considers the true value.

This is one reason brokers always warn clients not to rely on market hype — lenders go by valuations, not headlines. Your broker will often pre-empt this by checking comparable sales or even arranging a valuation before you apply, to avoid surprises later.

Why LVR Matters to Lenders and Brokers

Lenders use your LVR to gauge how much of your own money is invested in the property — in other words, how much “skin in the game” you have. The more equity (your money), the lower the perceived risk for the bank.

Here’s why LVR is such a big deal:

• 🏦 Risk assessment: Higher LVR = higher risk. If property prices fall, the lender could be left exposed.
• 💰 Interest rates: Lower LVRs often attract lower rates because you’re seen as a safer borrower.
• 📑 Approval chances: Lenders have strict LVR cut-offs. For example, some won’t lend above 90% without additional conditions.
• 🧾 Insurance triggers: Anything above 80% LVR usually triggers Lenders Mortgage Insurance (LMI).

For brokers, LVR is one of the first numbers they look at when assessing what kind of products, lenders, and terms they can secure for you.

Understanding Common LVR Tiers

LVR tiers determine what deals and rates are available. Here’s a quick breakdown of how they typically work in Victoria:

Your broker uses these tiers to match you with the right lender and negotiate the best deal possible for your situation.

How Your LVR Affects What a Broker Can Get for You

Now for the real question — how does your LVR influence what your broker can actually do for you?

1. The Lower the LVR, the More Negotiating Power

If your LVR is 80% or lower, your broker has greater leverage when negotiating interest rates and loan features. Lenders see you as low risk and are often willing to compete for your business — meaning your broker can pit multiple banks against each other to secure you a discount.

2. Above 80%: Limited Options, but Still Possible

If your LVR is between 81% and 90%, lenders become more selective. Your broker can still find great options, but they’ll need to compare more carefully, balancing LMI costs, loan features, and long-term savings. This is where broker expertise really matters — the difference between paying or avoiding thousands in insurance can come down to how your broker structures your application.

3. Above 90%: Specialist Strategy Required

At 90% and above, your broker enters specialist territory. They might recommend:

• Using a government scheme like the First Home Guarantee to avoid LMI
• Splitting the loan between lenders
• Providing additional supporting documents to strengthen your case
• Refinancing or restructuring after you build some equity

4. High-Value Property? Small Changes = Big Impact

In cities like Melbourne, where average home values are higher, even small changes in LVR can mean tens of thousands of dollars in difference. Your broker can help you decide whether to put in a slightly larger deposit to cross below an LVR threshold and unlock better rates.

For example, dropping from 82% to 80% LVR could save you both LMI and an extra 0.2–0.4% in interest — a win-win that pays off for years.

How to Reduce Your LVR Before Applying

If your LVR is too high, don’t panic — there are practical ways to improve it before applying. Your broker will likely suggest one or more of the following:

• Increase your deposit: Even a small boost can tip the ratio in your favour.
• Use genuine savings or a gift: These can count toward your equity if declared correctly.
• Buy below your maximum budget: Choosing a slightly cheaper property can lower your LVR significantly.
• Use equity from another property: If you already own a home or investment, your broker can structure a cross-collateralised loan.
• Wait and save longer: Sometimes, holding off for a few months to build your savings can save you thousands in the long run.

Brokers often run “what-if” scenarios, showing you how adjusting your deposit or purchase price affects your LVR, loan amount, and lender options — helping you make a data-driven decision.

The Connection Between LVR and Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance (LMI) is a one-off fee that protects the lender if you default on your loan. It’s usually required when your LVR is above 80%. While it doesn’t protect you (the borrower), it allows lenders to approve loans with smaller deposits.

Depending on your loan size and LVR, LMI can range from a few thousand dollars to over $20,000 in Victoria. For instance:

• At 85% LVR, LMI might cost around $3,000–$5,000
• At 90% LVR, it can climb to $10,000+
• At 95% LVR, it can exceed $20,000

Your broker will calculate the exact figure for your situation and weigh it against your savings rate, income, and goals. In some cases, paying LMI can make sense if it gets you into the market sooner — but your broker will show you both scenarios before you decide.

Real-World Examples of LVR in Action

Let’s look at two Victorian buyers to see how LVR can shape their outcomes:

Example 1: Emma – 20% Deposit (80% LVR)

Emma saved $140,000 for a $700,000 home. Her broker found multiple lenders offering competitive rates because her LVR was exactly 80%. She avoided LMI, got a discounted rate of 5.25%, and had a choice of loan features like offset accounts and free redraws.

Example 2: Jason – 10% Deposit (90% LVR)

Jason had $70,000 saved for the same $700,000 property. His broker explained that at 90% LVR, LMI would add about $11,000 to his costs. However, by applying under the First Home Guarantee, the broker helped him bypass LMI altogether — saving him the full amount while still locking in a good rate.

Both buyers achieved their goals — but Jason’s broker had to be more strategic in choosing a lender and program that matched his LVR situation.

Case Study: How a Broker in Victoria Negotiated a Better Deal

Case Study – Sarah & Ben in Mornington

Sarah and Ben were upgrading from their first home to a larger family property worth $950,000. They planned to use $100,000 from the sale of their old home as a deposit, putting their new LVR at about 89%. Their lender quoted an interest rate of 6.10% with mandatory LMI of $14,800.

Their broker at Lowest Interest Rates suggested increasing their deposit by $20,000 using short-term savings and a small family contribution. That simple change dropped their LVR to 86%, which reduced their LMI to under $7,000 and unlocked a lower interest rate of 5.75%.

Over the life of their loan, this saved them more than $25,000 — all because their broker understood how to work the LVR tiers to their advantage.

Final Thoughts – Work with Lowest Interest Rates

Your Loan-to-Value Ratio (LVR) is more than just a number — it’s the key that determines what lenders see, what rates you’re offered, and how much flexibility you’ll have. In Victoria’s competitive housing market, small LVR differences can translate into big savings or big costs.

That’s why working with a mortgage broker who understands LVR strategy is essential. At Lowest Interest Rates, our expert brokers calculate your LVR precisely, assess your best lender options, and help you structure your loan to save money both upfront and long term.

🏠 Ready to make your LVR work for you? Visit LowestInterestRates.com.au today to connect with a local Victorian broker who’ll turn your LVR into your biggest home-buying advantage.