Off-the-plan valuations, LVR and LMI: getting settlement-ready

Buying off-the-plan, your real finance risk sits at settlement — when the bank orders a fresh valuation and works out your loan-to-value ratio (LVR) and any lenders mortgage insurance (LMI). The lender will lend against the lower of the contract price or the final valuation, and any gap between those two can quickly force you to tip in more cash or pay LMI.

This guide walks through how valuations, LVR and LMI actually work for off-the-plan apartments in Australia, with worked examples you can run on your own numbers this week.

Your loan is ultimately assessed at the completion valuation, not at contract signing.

1. How valuations for off-the-plan actually work

1.1 When does the valuation happen?

For an off-the-plan apartment, there are usually two key valuation points:

1. At (or near) contract signing – sometimes a desktop or kerbside valuation to support an early approval.
2. Close to settlement – a full valuation on the completed apartment, which drives your final loan approval.

Your lender’s final decision is based on the completion valuation, not on any earlier estimate. If that valuation is lower than the contract price, the bank still uses the lower figure for the loan amount (see also /insights/off-the-plan-valuation-shortfall-what-to-do-next).

1.2 What valuers look at

For the completion valuation, the valuer will typically consider:

• Recent comparable sales in the same building and nearby
• Size, layout, level and aspect (e.g. high floor, views, noise exposure)
• Quality of finishes and any defects
• Car space, storage, on-title courtyards or balconies
• Building quality, facilities and strata fees
• Local oversupply, vacancy, and any stigma around the project or postcode

The result may be:

• In line with contract – easiest case; your planned LVR usually holds.
• Below contract (valuation shortfall) – pushes your effective LVR up and may force extra cash or LMI. This is common in oversupplied or high-density areas.
• Above contract (valuation uplift) – drops your LVR and gives you a buffer.

1.3 Why off-the-plan valuations are more fragile

Off-the-plan projects carry extra risk because there’s a time gap of 1–3+ years between signing and settlement. In that period:

• Markets can rise, fall or move sideways.
• Interest rates and borrowing rules can tighten.
• Individual buildings or areas can fall out of favour.

If values fall by settlement, your effective LVR rises even if you haven’t borrowed a cent more. That’s why valuation risk is front and centre in lender assessments for off-the-plan purchases (/insights/off-the-plan-finance-basics-eligibility).

2. LVR at settlement: the number that really matters

2.1 Quick definition

Loan-to-value ratio (LVR) is:

LVR = Loan amount ÷ Property value (as the bank sees it)

For off-the-plan, the “property value” is the lower of:

• Your contract price; and
• The valuer’s final figure at completion.

This single number drives:

• Maximum loan size
• Whether you pay LMI (and how much)
• Which lenders and products will consider you

2.2 Worked example – when valuation matches contract

Scenario A – Everything lines up

• Contract price: $800,000
• Final valuation: $800,000
• Deposit paid at exchange: 10% ($80,000)
• Buyer wants: 80% LVR (avoid LMI)

Maximum loan at 80% LVR:
80% × $800,000 = $640,000

Total funds required (ignoring costs):

• Purchase price: $800,000
• Loan: $640,000
• Cash/equity: $160,000 (20%)

You’ve already paid $80,000 deposit, so you need another $80,000 at settlement. No LMI.

2.3 Worked example – valuation falls 5%

Scenario B – 5% valuation shortfall

• Contract price: $800,000
• Final valuation: $760,000 (–5%)
• Deposit at exchange: 10% ($80,000)
• Lender still happy to 80% LVR

The bank now uses $760,000 as the value:

Maximum loan:
80% × $760,000 = $608,000

Total funds required:

• Purchase price: $800,000
• Loan: $608,000
• Cash/equity: $192,000

You’ve already paid $80,000, so you now need $112,000 at settlement (instead of $80,000). Your planned 20% contribution has effectively become 24% of the contract price.

2.4 Worked example – valuation falls 10% and you borrow to the limit

Scenario C – 10% valuation fall, higher LVR

• Contract price: $800,000
• Final valuation: $720,000 (–10%)
• Deposit: $80,000
• Lender allows up to 90% LVR with LMI

The bank’s value is $720,000:

• Maximum 90% loan: 90% × $720,000 = $648,000
• Total cash/equity required: $800,000 – $648,000 = $152,000

You’ve already paid $80,000, so the extra cash needed is $72,000, and you’re also paying LMI because you’re at 90% LVR on the bank’s numbers.

This is how a valuation fall can suddenly turn an “80% LVR, no LMI” plan into a higher LVR with both extra cash and LMI.