What Does LVR Mean?
When you're applying for a mortgage, one term you'll hear over and over is LVR—short for Loan-to-Value Ratio. It’s a simple concept, but it plays a major role in how banks assess your mortgage application.
In basic terms, LVR tells you what percentage of the property’s value is being borrowed. In other words, how much of the home the bank technically owns.
How to Calculate LVR
Let’s say you buy a house worth $800,000 and borrow $600,000 from the bank.
Your LVR is calculated as:
$600,000 ÷ $800,000 = 75%
Now imagine the value of your house increases to $900,000, but your mortgage remains at $600,000. Your LVR would now be:
$600,000 ÷ $900,000 = 66.7%
As the value of your home rises (and your loan stays the same or decreases), your LVR improves—meaning less of your house is “owned” by the bank.
What LVR Will Banks Lend Up To?
As of March 2025, these are the typical LVR thresholds:
Own-home (owner-occupied) purchases:
Up to 80% LVR is standard. Some borrowers may be able to access 90% or even 95%, but these are tightly controlled. Banks can only allocate 15% of new lending to low-deposit borrowers (LVRs above 80%).Investment property purchases:
Most banks lend up to 65% LVR. Lending above that is possible, but only within a small allocation (5% of their investor lending).
These rules change over time, so it’s a good idea to speak to a mortgage adviser about what’s available when you’re applying.
Exemptions to LVR Rules
Not all lending is subject to standard LVR restrictions. The following scenarios are usually exempt:
Buying a new build (off the plans or recently completed)
Bridging loans (short-term lending while buying and selling)
Refinancing an existing mortgage
Non-routine repairs, such as fixing a leaky home
Loans through Kāinga Ora or the First Home Loan scheme
These exemptions are part of the Reserve Bank’s broader lending rules. For more detail, visit the Reserve Bank of New Zealand’s website.
Why Do Banks Care About LVR?
The Reserve Bank introduced LVR restrictions in 2013 to help slow the rapid rise in house prices—especially in high-growth areas like Auckland.
By tightening how much people could borrow relative to the value of the property, the policy was designed to make buyers more cautious, reduce financial risk, and limit exposure to a housing bubble—without increasing interest rates across the board.
Since then, the rules have been adjusted a few times. These updates reflect market changes, and in some cases, have made borrowing slightly easier—particularly for investors and new-builds.
Summary
LVR, or Loan-to-Value Ratio, is a key factor in your mortgage application. It measures how much of the property is being financed through borrowing and can influence:
Your loan approval
Interest rates offered
Whether you qualify for certain exemptions
What properties you can buy (especially as an investor)
Whether you're a first home buyer or a seasoned investor, understanding your LVR—and how to improve it—can make all the difference.