Equity & Deposit Framework

How lenders measure starting risk, price leverage, and apply deposit rules across different borrower and property types.

Every Australian property loan begins with one core question:

How much risk is the lender being asked to take at the start of the transaction?

The Equity & Deposit Framework governs how that risk is measured, priced, and mitigated across all borrower types, property locations, and lending scenarios.

This framework explains why:


  • identical borrowers receive different outcomes
  • deposit size affects interest rates and flexibility
  • some buyers can enter with 5% while others cannot
  • leverage has both benefits and permanent trade-offs



What This Framework Controls

The Equity & Deposit Framework determines:


  • maximum Loan-to-Value Ratios (LVRs)
  • when Lenders Mortgage Insurance (LMI) applies
  • eligibility for government guarantee schemes
  • how guarantor structures are assessed
  • when higher pricing or restricted policies apply


It operates independently of income quality or borrowing intent.


Loan-to-Value Ratio (LVR) as the Core Measure

LVR is the primary risk metric used by lenders.

It represents:


  • the proportion of the property value being funded by debt
  • the buffer available to absorb market movement


As LVR increases:


  • lender risk rises
  • policy restrictions tighten
  • pricing and flexibility change


This is a mathematical relationship, not a judgment of the borrower.


Standard LVR Thresholds

Across the system:


  • ≤80% LVR is considered standard residential lending
  • >80% LVR introduces elevated risk controls
  • ≥90–95% LVR activates strict eligibility and pricing overlays


Once higher thresholds are crossed, outcomes diverge quickly.


Lenders Mortgage Insurance (LMI)

LMI is a risk-transfer mechanism.

Key characteristics:


  • it protects the lender, not the borrower. Should the borrower default on the loan.
  • it applies when equity buffers are thin
  • it allows higher leverage at a cost


LMI is not a penalty — it is the price of accelerated entry.

In some cases, it enables outcomes that would otherwise be impossible.


Government Guarantee Schemes

Government schemes modify — but do not replace — the equity framework.

Under these schemes:


  • the government guarantees part of the lender’s exposure
  • the borrower still carries full repayment responsibility
  • property price caps and eligibility rules apply


From a system perspective, guarantees reduce loss risk, not repayment risk.


Genuine Savings Requirements

At higher LVRs, lenders require proof of financial discipline.

This is measured via genuine savings, typically defined as:


  • funds held for a minimum period (commonly three months)
  • evidence of regular saving behaviour


Genuine savings are assessed separately from:


  • gifted funds
  • equity transfers
  • sale proceeds


This rule exists to predict repayment behaviour under stress.


Guarantor Structures

Guarantors operate within the equity framework — not income assessment.

Key system rules:


  • guarantors provide security support, not servicing support( They used to sometimes)
  • the borrower must service the full loan independently
  • guarantor exposure is usually capped and removable only if the guarantee applies to have the security released and the lender agrees.


Guarantors shift risk location, not risk existence.


Why Equity Structure Shapes Long-Term Outcomes

Deposit and equity decisions affect:


  • refinancing ability
  • exit flexibility
  • future borrowing capacity
  • portfolio sequencing


High leverage increases opportunity — but reduces margin for error.

Low leverage increases resilience — but slows acceleration.

The system treats these as trade-offs, not preferences.


How This Framework Interacts With Other Pillars

The Equity & Deposit Framework links directly to:



When equity is weak, all other rules tighten.

Detailed Explanations in This Pillar

The Equity & Deposit framework explains how starting position, leverage, and available security influence lending eligibility and risk:

These mechanics determine entry into the lending system and the level of risk applied from the outset.


What This Page Is — and Is Not

This page explains how equity and deposits are treated within the Australian lending system.

It does not:


  • recommend deposit strategies
  • compare lenders
  • assess individual affordability


Those decisions require personalised advice beyond this reference framework.

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