Investment Loan LVR: Why 88% Is the Smart Play for Property Investors
Whether you’re buying your first investment property or scaling into your next deal, how you structure your loan can have a major impact on your long-term success. One of the most overlooked – yet powerful – strategies in property finance is optimising your LVR. For many investors, 88% sits in the sweet spot. It gives you more leverage with less upfront cash, keeps your capital working across multiple deals, and avoids the extreme LMI costs that come with higher LVRs like 95%. It’s a smarter way to grow, not just faster.
At XploreFS, we work with driven investors who want to build wealth without overextending or playing it too safe. In this guide, we’ll show you why the 88% LVR strategy is gaining traction, what kind of investors it suits best, and how you can use it to accelerate your portfolio while staying financially in control.
What Is LVR and Why It Matters
Loan-to-value ratio (LVR) is the percentage of a property’s value that a lender will finance. For example, borrowing $880,000 on a $1 million property equals an 88% LVR. This number matters because it affects your interest rate, the size of your deposit, and whether you’ll need to pay Lenders Mortgage Insurance (LMI). Lenders use LVR as a key risk metric – higher LVR typically means higher perceived risk. But for strategic investors, a higher LVR can also mean higher returns, especially when used wisely to accelerate growth.
The 20% Deposit Rule – Still Relevant?
The 20% deposit has long been the gold standard, mainly to avoid LMI. But in today’s market, where prices move quickly and saving an extra 8% can take years, this rule can hold investors back. With interest rates relatively low and rental demand strong in many areas, the cost of waiting may exceed the cost of LMI. Investors focused on long-term capital growth often find that leveraging earlier, even with LMI, delivers better results than sitting on the sidelines waiting for more savings.
Why 88% LVR Is the Sweet Spot
At 88%, you’re not overextending like you might with a 95% LVR, but you’re also not tying up capital unnecessarily. Many lenders still offer favourable rates at this level, and the LMI cost – while present – is significantly lower than higher-LVR brackets. In some cases, certain professions or borrower types may even qualify for discounted or waived LMI. For investors trying to balance growth with risk, 88% hits a strategic middle ground. You retain capital flexibility without sacrificing too much on cost.
Leverage vs LMI – Playing the Long Game
LMI is often misunderstood. It’s not a penalty – it’s a tool that lets investors get into the market sooner. At 88% LVR, LMI premiums are typically manageable, especially when weighed against the potential capital growth of entering the market 6–12 months earlier. Consider this: if a property appreciates by $50,000 while you’re saving the last 8%, you’ve potentially missed out on more than you would have paid in LMI. For investors, this trade-off isn’t just acceptable – it’s often the smarter play.
The Investor Advantage
Unlike owner-occupiers, investors don’t just want to own property – they want to build portfolios. And that means stretching capital further. A 12% deposit instead of 20% frees up tens of thousands in cash, which can be redirected toward a second property, renovations to increase rental yield, or simply kept as a buffer. Combine that with interest-only loans, and you have a cash-flow-friendly strategy that supports faster scaling. In competitive markets, the ability to act quickly and secure multiple assets is a game-changer.
Using Trusts With High LVR Loans
Many self-employed investors use trust structures for asset protection or tax planning. The key is knowing which trusts lenders will accept. Hybrid trusts are often off-limits, but discretionary and fixed trusts are widely accepted – even at 88% LVR. The right structure paired with the right LVR gives you flexibility to grow your portfolio within a compliant, tax-effective framework. Work with a broker who understands trust lending policies to avoid roadblocks and wasted time.
Dealing With Perceived Risk
Higher LVR doesn’t automatically mean recklessness. Risk is multifaceted – and being capital-light can sometimes reduce financial stress. Keeping more cash in your buffer gives you options during vacancies, rate rises, or maintenance issues. Plus, investors with steady income and solid property choices can often withstand higher leverage with little downside. Lenders assess risk based on your whole profile, not just your deposit. If your strategy is sound, an 88% LVR might actually strengthen your position.
Dealing With Perceived Risk
Higher LVR doesn’t automatically mean recklessness. Risk is multifaceted – and being capital-light can sometimes reduce financial stress. Keeping more cash in your buffer gives you options during vacancies, rate rises, or maintenance issues. Plus, investors with steady income and solid property choices can often withstand higher leverage with little downside. Lenders assess risk based on your whole profile, not just your deposit. If your strategy is sound, an 88% LVR might actually strengthen your position.
How to Make the Strategy Work for You
Not every lender supports 88% LVR equally. Some reserve it for PAYG earners; others cater to self-employed or professionals with strong financials. A good broker will know who’s offering reduced LMI, flexible servicing criteria, or policy exceptions. Before committing to a 20% deposit, run the numbers on an 88% loan. Look at how much faster you can act, how much capital you retain, and what the opportunity cost of waiting might be. Often, the math favours movement over delay.
Frequently Asked Questions About Property Developer Loans
Can I refinance to an 88% LVR if my property has gone up in value?
Yes – if your property’s value has increased, you may be able to refinance and extract equity while staying at or below an 88% LVR. This can free up capital for your next purchase without crossing into high-LMI territory.
What professions qualify for waived or discounted LMI at 88% LVR?
Some lenders offer special LMI waivers or reductions for professionals like doctors, lawyers, accountants, and engineers. It depends on the lender’s policy, so it’s worth checking with a broker who understands lender-specific criteria.
How does an 88% LVR affect serviceability?
An 88% LVR doesn’t automatically reduce your borrowing capacity, but it can affect how lenders assess risk. Some may apply slightly tighter buffers or require stronger income evidence, especially if you’re using interest-only repayments or trust structures.
Is 88% LVR suitable for SMSF purchases?
No – SMSF loans generally require much lower LVRs, typically around 70–80%, and they come with stricter rules. The 88% LVR strategy is better suited to individual or trust-based investing outside of super.