Assets & Equity
How lenders assess capital position, leverage settings, and resilience to value change.
Every Australian property loan begins with a structural question:
What capital buffer exists between the lender’s exposure and potential loss?
The Assets & Equity pillar governs how that buffer is measured, priced, and constrained across borrower types, property categories, and policy settings.
This explains why:
- Identical borrowers receive different outcomes
- Deposit size affects pricing and flexibility
- Some buyers can enter at 5% while others cannot
- Leverage creates opportunity — and permanent structural trade-offs
What This Pillar Controls
The Assets & Equity pillar determines:
- Maximum Loan-to-Value Ratios (LVRs)
- When Lenders Mortgage Insurance (LMI) applies
- Eligibility for government guarantee schemes
- Treatment of guarantor security
- Equity release and refinance thresholds
It operates independently of income quality or repayment ability.
Loan-to-Value Ratio (LVR) as the Core Risk Metric
LVR=LoanAmount/PropertyValue
LVR is the primary leverage metric used across Australian lending.
It represents:
- The proportion of value funded by debt
- The buffer available to absorb market movement
As LVR increases:
- Structural risk rises
- Policy constraints tighten
- Pricing and flexibility change
This is a mathematical relationship, not a judgment of the borrower.
Standard System Thresholds
Across the system:
- ≤80% LVR is standard residential leverage
80% LVR introduces elevated risk controls
- ≥90–95% LVR activates strict overlays and eligibility filters
Once higher thresholds are crossed, institutional behaviour diverges quickly.
Lenders Mortgage Insurance (LMI)
LMI is a risk-transfer mechanism.
It:
- Protects the lender, not the borrower
- Applies when equity buffers are thin
- Allows higher leverage at a cost
It prices risk acceleration — it does not remove risk.
Government Guarantee Schemes
Guarantee schemes modify the loss profile — not repayment responsibility.
They:
- Reduce the lender’s potential loss exposure
- Leave repayment obligations unchanged
- Apply eligibility caps and structural limits
From a system perspective, guarantees alter capital risk — not serviceability risk.
Guarantor Structures
Guarantors operate within the equity pillar.
They:
- Provide additional security, not income
- Shift risk location, not risk existence
- Remain subject to release conditions
Long-Term Structural Impact
Equity positioning affects:
- Refinancing ability
- Portfolio sequencing
- Future borrowing capacity
- Exit flexibility
High leverage increases acceleration.
Low leverage increases resilience.
The system treats this as a structural trade-off.
Interaction With Other Pillars
Assets & Equity links directly to:
- Income & Serviceability
- Security & Collateral Risk
- Borrower Profile & Policy Sensitivity
When equity is weak, policy sensitivity increases across the system.
Loan-to-Value Ratio (LVR) & Deposit Position
What This Page Is — and Is Not
This page documents how capital position and leverage are assessed within Australian lending.
It does not:
- Recommend deposit strategies
- Compare lenders
- Provide personalised affordability analysis
Application to an individual position requires personalised advice.
Detailed Explanations in This Pillar
The Equity & Deposit framework explains how starting position, leverage, and available security influence lending eligibility and risk:
- Deposit size and Loan-to-Value Ratio (LVR)
- Lenders Mortgage Insurance (LMI) and risk transfer
- Guarantor structures and family support
- Usable equity versus theoretical equity
- Accessing equity for future borrowing
These mechanics determine entry into the lending system and the level of risk applied from the outset.
Loan-to-Value Ratio (LVR) & Deposit Position
Where Equity Influences Lending Outcomes
The Equity & Deposit Framework explains how starting risk is measured within Australian lending assessment.
To understand how equity and leverage shape real-world borrowing outcomes,
refer to the Canonical Lending Question clusters in which these mechanics operate in decision context:
- Deposit, Equity & Funds to Complete — how capital position determines entry into lending
- Borrowing Capacity Mechanics — how leverage interacts with usable borrowing power
- Security Acceptability & Asset Risk — how property characteristics constrain allowable Loan-to-Value Ratios
- Policy Sensitivity & Exception Conditions — where high-leverage or non-standard structures alter institutional outcomes
Where application to an individual position is required,
a Structur snapshot can map equity position, leverage sensitivity, and potential borrowing pathways
without providing personal advice.
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