Updated 30 September 2026
What is LVR (or LTV)?
A $600,000 loan on an $800,000 home is an LVR of 75%. Australians say LVR; in the UK and US it's usually LTV (loan-to-value). They mean the same thing. The value is normally the lender's valuation, which can be lower than what you think the property is worth, or what you paid.
If a loan is secured by more than one property, the lender looks at the total loan against the total value of the security. When you track this yourself, split a shared loan across the properties in proportion to their values to get an LVR for each.
Why do lenders care about 80%?
80% is the common threshold where lenders start to treat a loan as higher risk. Above it, you'll typically face lenders mortgage insurance (LMI) in Australia, private mortgage insurance (PMI) on many US conventional loans, or higher interest rates in the UK, where mortgage pricing is usually set in LTV bands (60%, 75%, 80%, 90% and so on). Below it, you generally get better rates and more room to borrow against your home.
LVR also changes without you doing anything. If property prices fall 10%, an 80% LVR becomes about 89%. That matters when you refinance, since a new lender will revalue the property.
How does an offset account reduce interest?
An offset account is a transaction or savings account linked to your mortgage. Instead of earning interest, its balance is subtracted from the loan balance before interest is calculated. In Australia a 100% offset is common, and interest is usually calculated daily.
Three things people often miss:
- The loan balance doesn't change. Your repayments are usually the same; more of each one goes to principal, so the loan is paid off sooner. But the debt on the statement is still the full amount.
- The money is still yours. You can withdraw it at any time, which is the difference from making an extra repayment into a redraw facility.
- It's often better than a savings account after tax. Savings interest is usually taxable income; interest you avoid paying generally isn't. If your mortgage rate is above your savings rate, the gap widens further.
Offset accounts are standard in Australia. In the UK they exist as offset mortgages, offered by some lenders, where savings held with the lender are set against the mortgage balance in the same way. They're uncommon in the US.
What is effective LVR?
Because offset money is set against the loan for interest, it's useful to look at your position net of it:
Lenders use the actual loan balance, not the effective one, for insurance and pricing. Effective LVR is a personal measure: how much you'd owe if you swept the offset into the loan today.
What's the difference between equity and usable equity?
Equity is the property's value minus the loans secured by it. Usable equity is what a lender might let you borrow against, commonly calculated to 80% of the value:
Usable equity isn't free money. Borrowing it adds debt and interest, and a lender will also check that your income can service the larger loan.
A worked example
Illustrative figures, and simplified interest (no compounding, balances held constant for the year):
| Measure | Calculation | Result |
|---|---|---|
| Property value | Recent valuation | $800,000 |
| Mortgage balance | From the loan statement | $600,000 |
| Offset balance | From the account statement | $50,000 |
| LVR | 600,000 ÷ 800,000 | 75% |
| Effective loan balance | 600,000 − 50,000 | $550,000 |
| Effective LVR | 550,000 ÷ 800,000 | 68.75% |
| Equity | 800,000 − 600,000 | $200,000 |
| Usable equity at 80% | 640,000 − 600,000 | $40,000 |
| Interest saved at 6% a year | 50,000 × 6% | about $3,000 a year |
For your net worth, the offset is cash (an asset) and the mortgage is a debt: $800,000 + $50,000 − $600,000 = $250,000. Don't also subtract the offset from the loan, or you'll count it twice.
Run your own numbers with the loan-to-value calculator.
How do you keep an eye on it?
A single LVR is easy. It gets harder with several properties, a loan secured by two of them, offsets linked to different loans, and a partner who owns half of one. Worthbase handles this: you link a loan to the property (or properties) that secure it and each offset to its loan, and its debt report shows each loan's balance and effective balance after offsets, and each property's value, secured debt, equity and LVR. A loan secured by several properties is split in proportion to their values. Property values are manual: you or your AI record a valuation with its source and date, and by default Worthbase flags it once it's more than 90 days old. It doesn't calculate usable equity or borrowing capacity, and it never talks to your lender.
This guide is general information, not financial or lending advice.
Questions
Does an offset account reduce my LVR?
Not officially. Lenders use the actual loan balance, which an offset doesn't change. It reduces your effective LVR and the interest you pay.
Is an offset account better than paying extra off the loan?
The interest saving is usually the same. An offset keeps the money accessible and separate. Extra repayments may be harder to withdraw, and for an investment loan, redrawing can affect what interest is deductible. Check with an adviser if the loan is for investment.
What is a good LVR?
At or below 80% avoids mortgage insurance with most lenders and usually gets better rates. Lower LVRs, such as 60% or 70%, often unlock the best pricing.
Do UK lenders offer offset mortgages?
Some do. Savings held with the lender are offset against the mortgage balance, so you pay interest on the difference and earn no interest on the savings.
