February 5, 2026

Loan-to-Value Ratio Explained: What LVR Means for Your First-Home Deposit

If you are buying your first home in New Zealand, you wil quickly come across the term Loan-to-Value Ratio, shortened to LVR. It’s one of the key rules banks use when deciding how much they are willing to lend, and it directly affects how large your deposit needs to be.

LVR can sound technical, but the concept itself is straightforward. Once you understand how it works, it becomes much easier to plan your savings, assess your options, and avoid surprises when applying for a home loan.

In this article you can find a practical explanation of loan to value ratio, how it impacts your deposit, and what options you may have depending on your situation.

What Is Loan-to-Value Ratio (LVR)?

Loan-to-Value Ratio is simply the percentage of a property’s value that you borrow from the bank.

For example:

• If a property is worth $800,000 and you borrow $640,000, your LVR is 80%
• The remaining 20% comes from your deposit

From a lender’s perspective, the lower the LVR, the lower the risk. From a buyer’s perspective, a lower LVR usually means better lending options and fewer restrictions.

Why LVR Matters to First-Home Buyers

The Reserve Bank of New Zealand sets LVR restrictions that limit how much low-deposit lending banks can do. These rules are designed to keep the financial system stable, but they also influence who can buy and when.

For most first home buyers purchasing an existing property, lenders generally prefer a 20% deposit, which equates to an 80% LVR.

That said, not all lending fits neatly into that box. Lenders are allowed to make a limited amount of low-deposit loans, and some buyers qualify under specific schemes or exemptions.

Understanding where you sit on the LVR scale helps you answer practical questions such as:

• Do I need to save more, or can I buy now?
• Should I focus on a new build instead of an existing home?
• Will my interest rate or loan structure be affected?

If you are early in the process, starting with a conversation around first home loans can help set realistic expectations.

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How LVR vs Deposit Size

Your required deposit is directly tied to the LVR a lender is willing to accept.

• 80% LVR means a 20% deposit is required
• 90% LVR means a 10% deposit is required
• 95% LVR means a 5% deposit is required

The higher the LVR, the smaller your deposit, but also the tighter the lending criteria. Higher LVR loans are assessed more carefully, and not every borrower or property will qualify.

In addition, higher LVR lending can sometimes come with:

• Slightly higher interest rates
• Tighter servicing assessments
• Fewer lender options

This is where advice matters. Two buyers with the same deposit can receive very different outcomes depending on income, expenses, property type, and lender policy.

New Builds and LVR Flexibility

One important exception to standard LVR rules is new build property.

New builds are often treated more favourably by lenders, and banks may allow borrowing at higher LVRs, sometimes up to 90%, and in limited cases even higher. This is one reason many first-home buyers consider new builds when their deposit is still growing.

However, not every property advertised as a new build qualifies. The definition can vary by lender and usually depends on factors such as:

• If the property has been previously occupied
• How recently it was completed
• The structure of the purchase, for example turnkey vs construction loan

If you are exploring this route, it is worth getting clarity early through a home loan pre-approval so you know exactly what deposit is required for your chosen property type.

Using KiwiSaver and Other Deposit Sources

For most first-home buyers, the deposit does not come from savings alone.

Common deposit sources include:

• KiwiSaver first-home withdrawals
• Cash savings
• Gifts or loans from family
• Sale proceeds from assets such as vehicles or investments

From an LVR perspective, banks generally look at the total deposit amount, not where it comes from, although they will check that any gifted funds are non-repayable.

Using KiwiSaver can be particularly effective, as it can move you from a higher-risk LVR into a more comfortable lending range. This often improves both approval chances and loan terms.

Can You Still Buy With a Low Deposit?

Yes, in some cases. Buying with a low deposit is possible, but it is more nuanced than it used to be.

Low-deposit approvals depend on:

• Strong, stable income
• Sensible spending patterns
• Clean credit history
• Property type and location
• Current bank appetite for low-LVR lending

This is where working with an adviser adds value. At Capital Advice, we assess which lenders are most open to low-deposit scenarios and structure applications accordingly, rather than applying blindly and risking a decline.

If you already own a home or are refinancing, LVR also plays a role in mortgage reviews and future borrowing capacity.

LVR Is Only One Part of the Picture

While LVR is important, it is not the only factor banks consider. Affordability still matters just as much, if not more.

Banks will also assess:

• Income and employment stability
• Living expenses
• Existing debts
• Interest rate buffers

It is possible to have a strong deposit but still be limited by servicing, or to have excellent income but be held back by LVR. The balance between the two is what ultimately determines your outcome.

Getting Clear on Your LVR Position

A short discussion with a mortgage adviser can confirm:

• Your likely LVR
• Whether low-deposit options apply
• What steps could improve your position over the next few months

At Capital Advice, our role is to explain these rules in plain language and help you move forward with confidence. If you want personalised guidance, feel free to contact us for a no-obligation conversation.

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