Quick answer
Combined LVR is the total of every loan secured on the property, first mortgage plus the proposed second, divided by the property's value. A $1,000,000 property with $500,000 owing and a new $150,000 second mortgage has a combined LVR of 65%. Second lenders cap combined LVR by property type and location, and that cap sets the maximum second mortgage available.
Key points
- Combined LVR = (first mortgage balance + second mortgage) ÷ property value.
- Use the first loan's limit, not just its balance, if redraw is available.
- Residential property generally supports a higher combined LVR than commercial or specialised property.
- Lower combined LVR means a thicker buffer, a smoother approval and more options.
- Formula
- (1st + 2nd) ÷ value
- Balance or limit?
- Often the limit
- Lowest LVR
- Easiest approval
- Tool
- Equity & LVR calculator
What is the combined LVR formula?
Loan-to-value ratio (LVR) is the loan as a percentage of the property’s value. With a second mortgage there are two loans on one property, so lenders look at the total:
Combined LVR = (first mortgage + second mortgage) ÷ property value × 100
Current LVR is the same calculation before the new loan: first mortgage divided by value. The difference between the two tells you how much of your equity the new loan would use.
Three worked examples (illustrative)
| Home, Brisbane | Warehouse unit, Melbourne | Townhouse, Adelaide | |
|---|---|---|---|
| Value | $900,000 | $1,400,000 | $650,000 |
| First mortgage | $420,000 | $600,000 | $300,000 |
| Current LVR | 46.7% | 42.9% | 46.2% |
| Second mortgage requested | $150,000 | $250,000 | $150,000 |
| Combined LVR | 63.3% | 60.7% | 69.2% |
The first example sits comfortably. The warehouse is at a similar LVR, but because commercial property is usually assessed more conservatively, 60.7% puts it closer to a lender’s ceiling than the same number on a house would. The townhouse is workable, but a lender may want a smaller amount, a stronger exit or both.
Run your own numbers in the second-mortgage equity and LVR calculator. It shows current LVR, combined LVR, the equity buffer and the most you could request while staying inside each planning band.
Where do the planning bands come from?
Every lender sets its own maximum combined LVR, and it moves with property type, location, loan size and the borrower’s story. We don’t publish any lender’s policy. To give owners a sensible starting point, our tools use conservative planning bands:
| Band | Residential | Commercial |
|---|---|---|
| Comfortable | Up to 65% | Up to 55% |
| Workable | 65% – 75% | 55% – 65% |
| Stretch | 75% – 80% | 65% – 70% |
| Outside most second-mortgage appetite | Above 80% | Above 70% |
Treat these as a way to frame the conversation, not a promise or a limit. A strong exit and a well-located property can support more; a remote or specialised property may support less.
Balance or limit: which first-mortgage figure is used?
This catches many owners out. If your first loan has redraw, an offset arrangement that can be drawn, or a line of credit, the second lender will often use the limit rather than today’s balance. The reason is simple: after settlement you could draw back up to the limit, and that money would rank ahead of the second lender.
Two fixes are common:
- Reduce the limit on the first loan to the current balance before settlement.
- Agree a priority amount with the first lender that caps its claim. See priority and registration.
Our guide to reading your home loan statement shows where balance, limit and available redraw appear.
How does valuation change the result?
Combined LVR is only as good as the value underneath it. A 5% difference in value can move combined LVR by several points. Lenders rely on their own valuation, ranging from a desktop estimate to a full inspection, and they value conservatively. If you’re relying on a number from a real estate appraisal or a neighbour’s sale, allow some slack. Our page on second mortgage valuations explains which type is used when.
Ready to see where your property lands? Share the value and balance with a specialist and we’ll tell you what’s realistic.
How do you lower your combined LVR if it’s too high?
- Borrow less now. Take what solves the immediate problem and leave room for later.
- Add a second property. Spreading security across two titles lowers the combined LVR on each. See second mortgages over two properties.
- Pay down other debt on the title with part of the proceeds if that frees up headroom.
- Show a stronger exit. It won’t change the arithmetic, but it can change what a lender is comfortable with.
Does the lender look at LVR across all your properties?
Usually the assessment is property by property, but a lender will look at your wider position if it affects the exit. If the plan is to sell a different property to repay the second mortgage, that property’s debt and value matter too. If a business loan elsewhere is secured over the same home through a general security or guarantee, it may need to be counted. Mention every loan attached to the title, even ones that feel unrelated, because they surface on the title search anyway and it’s faster to deal with them up front.
It’s also worth separating what you owe from what you’ve guaranteed. A personal guarantee of a company’s equipment loan isn’t a mortgage on your home, but a lender will still ask about it when assessing how comfortable the overall position is.
What else sits in the buffer above the LVR?
The equity left over isn’t all “spare”. Selling costs, interest that accrues over the term and the chance of a softer market all eat into it. That’s why the gap above the combined LVR is treated as a buffer rather than free equity. We break it down in equity buffer explained.
Know your number? Let’s check it against real appetite
Once you have a rough combined LVR, a specialist can tell you quickly whether it’s inside what lenders will do for your property type and purpose. The enquiry takes about a minute, and no credit check is run when you first enquire.
Your details go to one person, not a panel of lenders, and that person will ring you with a straight answer. Please give the value, balance and any redraw or limit as accurately as you can so the LVR we discuss matches the one the lender will calculate.
Frequently asked questions
What is a good combined LVR for a second mortgage?
Lower is always easier. As planning bands only, our calculator treats a combined LVR up to 65% on residential property as comfortable, 65% to 75% as workable, and 75% to 80% as a stretch. Commercial property bands are set lower. Individual lenders set their own limits.
Does the lender use my estimate of value?
No. Your estimate helps size the enquiry, but the lender relies on its own valuation. If that comes in lower, the combined LVR rises and the maximum second mortgage falls.
Why would a lender use my loan limit instead of the balance?
If you can redraw on the first loan, the balance could rise back to the limit after settlement. Using the limit shows the worst case the second lender could face.
Does paying down the first loan increase what I can borrow?
Yes. Every dollar off the first mortgage lowers the combined LVR and increases the headroom for a second mortgage, provided the redraw isn't still available.
Do fees count in the LVR?
Usually the loan amount includes any fees or prepaid interest added to it, so they count. Ask for the gross loan amount, not just the cash you'll receive.