LVR Calculator

LVR stands for Loan-to-Value Ratio and is calculated as the mortgage loan amount divided by the property value, expressed as a percentage. For example, if you are buying a home for $700,000 and borrowing $560,000, your LVR is $560,000 / $700,000 = 80%. LVR matters because the Reserve Bank of New Zealand (RBNZ) sets restrictions on how much high-LVR lending banks can do, to protect financial system stability. Loans above 80% LVR for owner-occupiers are classified as high-LVR. At high LVR, banks typically charge higher interest rates (low-equity premiums) and have stricter lending criteria, meaning your borrowing capacity may be reduced. A lower LVR means more equity, lower risk to the lender, and typically better interest rate pricing. Source: RBNZ rbnz.govt.nz/financial-stability/macro-prudential-policy/loan-to-value-restrictions.

The Reserve Bank of New Zealand (RBNZ) sets LVR restrictions as a macro-prudential tool to manage housing market risk. As of the 2024 settings (reviewed regularly), the restrictions are: for owner-occupiers, banks may lend no more than 15% of their new residential mortgage lending at LVR above 80% (i.e. to borrowers with deposits below 20%); for residential property investors, banks may lend no more than 5% of their new residential mortgage lending at LVR above 65% (i.e. investors need at least a 35% deposit). These restrictions mean most buyers need at least a 20% deposit to access mainstream mortgage lending, and investors need at least 35%. New-build properties may be exempt from these restrictions under certain conditions, providing a potential pathway for buyers with smaller deposits. Source: RBNZ rbnz.govt.nz/financial-stability/macro-prudential-policy/loan-to-value-restrictions.

In New Zealand, your LVR directly influences the interest rate a bank will offer you. Banks assess LVR as a measure of credit risk: the higher the LVR, the more the bank is at risk if property values fall and the borrower defaults. For LVRs above 80%, most NZ banks apply a low-equity premium (LEP), which is an additional margin added to the standard interest rate. This premium typically ranges from 0.25% to 0.75% per annum depending on the lender and the LVR. Unlike Australia, New Zealand does not have a widespread Lenders Mortgage Insurance (LMI) market, so the risk cost is incorporated into the interest rate margin instead. Reducing your LVR below 80% (or ideally to 70% or less) typically removes the low-equity premium and qualifies you for more competitive interest rates. Source: RBNZ rbnz.govt.nz/financial-stability/macro-prudential-policy/loan-to-value-restrictions.

Reducing your LVR means increasing your deposit relative to the purchase price, and there are several strategies available to NZ home buyers. Save a larger deposit over time using a dedicated savings account or term deposit. Withdraw your KiwiSaver balance: first home buyers can withdraw most of their KiwiSaver savings (subject to a minimum balance of $1,000 remaining) after at least 3 years of membership. Apply for the First Home Grant from Kāinga Ora: eligible buyers can receive up to $10,000 for an existing home or $20,000 for a new build (income and purchase price caps apply). Ask family for a gifted deposit or family loan, noting that banks will need evidence it is a genuine gift with no repayment obligation. Buy at a lower purchase price to improve the deposit-to-price ratio. Source: RBNZ rbnz.govt.nz/financial-stability/macro-prudential-policy/loan-to-value-restrictions; Kāinga Ora.