What Does LVR Mean?

When applying for a mortgage, borrowers frequently encounter the term LVR (Loan-to-Value Ratio). This metric represents what percentage of the property's value is being borrowed or how much of the home the bank technically owns.

How to Calculate LVR

The calculation divides the loan amount by the property value. For example:

• •Property worth $800,000 with a $600,000 mortgage = 75% LVR ($600,000 ÷ $800,000)
• •If that same property appreciates to $900,000 while the mortgage remains $600,000, the LVR improves to 66.7%

As property values rise while loans stay constant or decrease, the LVR improves, meaning less of your house is "owned" by the bank.

Current LVR Lending Thresholds (June 2026)

Owner-occupier purchases: High-LVR lending for owner-occupiers is defined as lending above 80% LVR. Banks may allocate no more than 25% of their new owner-occupier lending to loans above this 80% LVR threshold.

Investment property purchases: High-LVR lending for investors is defined as lending above 70% LVR. Banks may allocate no more than 10% of their new investor lending to loans above this 70% LVR threshold.

Exemptions to LVR Rules

LVR restrictions apply to new lending, not retrospectively. The following types of lending are typically exempt from standard LVR restrictions:

• •Kāinga Ora loans, including First Home Loans
• •Same/lower-value refinancing
• •Portability with no increase in the loan amount
• •Bridging finance
• •Non-routine remediation
• •Construction loans
• •Some newly built homes bought from the developer within 6 months of completion

Why Banks Enforce LVR Restrictions

The Reserve Bank implemented LVR controls in 2013 to moderate rapid house price increases, particularly in high-growth areas. By restricting borrowing relative to property value, the policy aimed to encourage caution among buyers and reduce financial risk without increasing interest rates across the board.

Understanding Your Borrowing Position

LVR determines what percentage of a property's value requires financing. Understanding this ratio affects loan approval odds, interest rates offered, eligibility for exemptions, and investment property purchasing capacity.

LVR Rules When You Refinance Or Top Up

LVR restrictions apply to new lending, not retrospectively, which is important to understand when managing your mortgage. Exemptions like same/lower-value refinancing and portability with no increase mean you might be able to move your existing loan to another bank or property without triggering new LVR assessments. However, a top-up or equity release can matter if your total lending crosses high-LVR thresholds, as banks will reassess your LVR and their lending policies. Before assuming your equity is enough, compare the refinance purpose, property value, and total lending position. Our refinancing guide, top-up guide, and documents checklist explain the practical steps.