In Australia’s dynamic property market, the deposit doesn’t just secure a home—it primarily defines the financial leverage. For many Australians, the exceptional journey to homeownership is a significant milestone, a testament to years of careful planning in conjunction with disciplined savings. If you’re gearing up to apply for a home loan, your deposit could hold more power than you realize. Home loan approvals aren’t just about income and credit scores. One of the most decisive factors is how much you’re putting down—the deposit. This directly impacts your Loan-to-Value Ratio, or LVR, a percentage that carries weight across all aspects of your loan application in a specific manner. The lower this ratio, the more attractive you are to lenders.

A solid understanding of LVR is not just a financial detail; it’s the foundation upon which your homeownership dream is built. At OM Financials, we believe that understanding your LVR is not just a part of the application process—it is the primary foundation of a successful financial strategy to build a smarter path to property ownership, one step—and one deposit—at a time.

What exactly is LVR? The Foundation of Your Home Loan

At its core, the Loan-to-Value Ratio, or LVR, is a fundamental metric used by lenders to assess the risk of a home loan application. It firmly represents the ratio of the amount you are borrowing to the property’s appraised value, expressed as a percentage. In simple terms, your LVR is the inverse of your deposit.

How to calculate LVR:

LVR = (Loan Amount / Property’s Appraised Value) x 100

For example, if you’re purchasing a property valued at $800,000 and have a deposit of $160,000, your loan amount tends to be $640,000. Your LVR would be ($640,000 / $800,000) x 100, which nearly equals 80%. This implies you’re borrowing 80% of the property’s value, while your deposit primarily covers the remaining 20%.

This ratio is a critical indicator for lenders. A lower LVR signifies a smaller risk for the lender, as it means you have a substantial financial stake in the property. Conversely, a high LVR indicates a larger loan relative to the property’s value, which can be perceived as a higher risk.

The Direct Correlation Between Your Deposit and Your LVR

Putting down a larger deposit—and therefore achieving a lower LVR—provides a multitude of advantages that extend well beyond a lender’s initial risk assessment. Your deposit is the single most important factor you can control that influences your LVR. The size of your deposit directly dictates the amount you need to borrow and, therefore, your LVR.

1. A Deposit of 20% or More: This is the gold standard for home loan applications. A 20% deposit (or more) results in an LVR of 80% or less. This is firmly favorable to lenders for several reasons:

• Avoiding Lenders Mortgage Insurance (LMI): This is the most significant benefit. LMI is a mandatory insurance policy that protects the lender, not the borrower, in case you default on your loan. It is typically required for any loan with an LVR above 80%. By saving a 20% deposit, you can avoid this costly one-off fee in a particular manner, which can run into thousands or even tens of thousands of dollars.
  
• Access to More Competitive Rates: Lenders often reserve their most attractive interest rates for borrowers with lower LVRs, since they are considered a lower risk. Indeed, a 20% deposit can intricately open the door to a broad range of competitive loan products and potentially save you a substantial amount in interest over the life of your loan.
  
• Increased Borrowing Capacity: A lower LVR can sometimes improve your borrowing capacity, since the lender perceives you as more financially stable.

2. A Deposit of Less Than 20%: While a smaller deposit makes it harder to secure a loan, it’s not impossible. Many borrowers, particularly first-home buyers, purchase property with a deposit of 5% or 10%. In these cases, your LVR would be 95% or 90%, respectively. Key considerations for a high LVR loan include:

• Higher Interest Rates: You may find that the interest rates are slightly higher in contrast with a low-LVR loan.
  
• Create a Realistic Savings Plan: Determine your target deposit and set a realistic timeline. A detailed budget that tracks your income and expenses is the first step.
  
• Automate Your Savings: Set up an automatic transfer from your main account to a high-interest savings account. “Paying yourself first “ensures your savings grow consistently without you having to think about it.
  
• Explore First Home Buyer Schemes: Government schemes, namely the First Home Loan Deposit Scheme or state-based grants, can intricately reduce the deposit required and even help you avoid LMI.
• Consider a Guarantor: A family member can act as a guarantor, using their own home equity as security for a portion of your loan. Furthermore, this can help you secure a loan with a smaller deposit, but it is a serious commitment that primarily requires careful consideration.

Statistical Data on LVRs and Loan Commitments

To provide a data-driven perspective, let’s look at recent trends in the Australian lending market. The following data is based on the most recent available statistics from the Australian Bureau of Statistics (ABS), providing context for how deposits and LVRs have been affecting the market.

This data shows a robust increase in new loan commitments, indicating a growing market. The strong growth in investor loans, in particular, highlights a confident market where LVRs are a key consideration for borrowers as well as lenders.

	Mar Qtr 25no	Dec Qtr 24 to Mar Qtr 25% change	Mar Qtr 24 to Mar Qtr 25% change
Total loan commitments	127,108	-3.5	6.0
Owner occupier	79,890	-3.4	4.4
First home buyers	28,383	-4.2	1.3
Non-first home buyers	50,822	-3.8	6.1
Investor	47,218	-3.7	8.8

Source: Australian Bureau of Statics(ABS)

This is a succinct description of the aforementioned table to understand it better and clearly. Total loan commitments for the March quarter of 2025 amounted to $127,108, reflecting a 3.5% decline compared to the prior quarter. Despite this quarterly decline, total commitments saw a 6.0% increase when compared to the March Quarter 2024. The data shows a general downward trend in all loan types compared to the previous quarter, with first-home buyers experiencing the most significant drop at 4.2%. However, all categories, particularly investor loans, showed positive growth when compared year-over-year.

A Real-World Perspective: The Role of a Mortgage Broker

At OM Financials, we’re more than just mortgage brokers; we’re your strategic financial partners. We provide honest and professional service, built on the foundation of loyalty and stability, with the commitment to putting our customers first. Our expert brokers use their deep market knowledge to provide unbiased representation with a wide range of lenders, ensuring you get a loan that perfectly aligns with your financial goals. We empower you with the knowledge and strategy to build a better financial future.

Final Words: Building Your Financial Future with Precision.

In the world of home loans, knowledge truly is power—and understanding how your deposit affects LVR puts you firmly in the forefront. Your deposit is more than a down payment—it is your financial signal to the lender. Navigating the complexities of LMI, understanding the differences in interest rates tied to LVR, and identifying the right time to enter the market are all challenges that a proficient professional broker can help you overcome. This is where OM Financials firmly distinguishes itself, and, above all, we go beyond simply finding you a loan. We precisely operate with a commitment to understanding your unique financial situation and long-term goals, analyzing your deposit, income, and financial health to help you understand your optimal LVR and provide a clear, strategic path forward.

This exceptional journey should not be embarked upon in isolation. Having an adept professional by your side who can decode LVR, interpret market data, and leverage lender relationships is the key to a stress-free and successful loan application. The size of your deposit is your first step, but the right advice is what will get you across the finish line. Contact us now at +61-478-876-967 or book your free consultation call with OM Financials and take the first step towards securing your financial future.