Commercial Property Deposit & LVR (Australia)
In commercial lending, your maximum loan is usually capped by two numbers: LVR (security) and DSCR (cash flow). This page explains how lenders set commercial property LVR, what deposit ranges are realistic by scenario, and how to avoid the classic late surprise: “the valuation came in low — now we need more cash.”
If you want a lender-fit view for your exact property, lease and structure, speak with a Commercial Mortgage Broker Australia. To stress-test your DSCR and repayments in minutes, use the Commercial Property Calculator (and if you’re unsure where you sit at all, start with the Business Loan Eligibility Check).
General information only — not financial, legal or tax advice. Commercial facilities can include lender, valuation and legal fees. Policy varies by lender, asset type, lease and borrower strength.
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1) Deposit in plain English: what lenders actually mean
When people ask “how much deposit do I need for a commercial property loan?”, lenders answer with an LVR. LVR (Loan-to-Value Ratio) is loan amount ÷ property value. Your deposit is the flip side: deposit % = 100% − LVR.
In many mainstream purchases, borrowers plan around 60–70% LVR (roughly a 30–40% deposit) plus costs. Stronger deals can sometimes push higher, and higher-risk deals often need more equity. The goal isn’t “maximum leverage” — it’s a structure that stays comfortable if the property is revalued at annual review.
Two things trip people up:
- LVR is based on the lender’s valuation, not always the contract price. If the valuation is lower, the required cash deposit increases.
- LVR isn’t the only cap. Even with a large deposit, the lender may still limit the loan if the income can’t service the debt (DSCR). That’s why we suggest running a quick scenario in the commercial loan calculator before you sign.
If you want a lender-fit estimate (instead of internet averages), a Commercial Mortgage Broker can quickly map which lender tier is realistic for your property + lease + borrower profile.
2) LVR maths + deposit examples (so you can sanity-check quickly)
LVR = Loan ÷ Value
Loan = Value × LVR
Deposit = Value − Loan
“Value” here usually means the bank valuation. If the contract price is higher than the valuation, the difference is effectively added to your required cash contribution.
Example: $1,000,000 property (deposit only, excluding costs)
| Target LVR | Indicative loan amount | Indicative cash deposit | What this usually signals |
|---|---|---|---|
| 80% | $800,000 | $200,000 | Higher leverage; usually needs a very strong overall profile. |
| 70% | $700,000 | $300,000 | Common “middle” target for many mainstream assets (case-dependent). |
| 65% | $650,000 | $350,000 | More buffer for valuation variance and covenants. |
| 60% | $600,000 | $400,000 | Often used when the asset/lease is higher risk or the market is thin. |
These figures exclude stamp duty, legal fees, valuation fees, lender fees, due diligence and any GST/adjustments that may apply. Always model a buffer.
3) What moves max LVR in commercial lending
Lenders don’t set LVR from a single rule. They combine: (1) how easily the property can be sold if things go wrong, and (2) how confident they are that the income won’t collapse (or require major incentives) at the next leasing event. That’s why the same borrower can see different outcomes depending on the asset type, lease profile and location.
Mainstream, flexible properties in deep markets tend to support higher LVRs. Specialised assets and thin locations reduce buyer depth and increase valuation volatility.
The stronger and longer the lease (WALE, tenant covenant, rent reviews), the easier it is for lenders to underwrite higher leverage — all else equal.
Clean financials, a strong balance sheet, and a tidy structure can expand options. Weak trading, messy ATO position or complex entities can tighten policy quickly.
LVR vs DSCR: which one actually caps the loan?
Think of approvals as a “lowest number wins” test. The lender will generally lend up to the lowest of:
- LVR limit: valuation × max LVR
- DSCR/serviceability limit: the loan size the income can support under the lender’s stress assumptions
- Policy constraints: lender-specific limits by asset type, location, lease risk, loan size and borrower profile
Run your rent and repayments in the Commercial Property Calculator, then pressure-test a conservative version (vacancy/expenses up, rent down, higher assessment rate). If the downside DSCR is tight, a bigger deposit (lower loan) is often the fastest fix — but not always the best structure.
For a deeper, step-by-step overview of criteria (and where LVR fits into covenants and annual reviews), see the Commercial Property Finance Guide.
4) Indicative LVR bands by scenario (not guarantees)
The table below is an indicative way to think about commercial property deposit requirements. It’s not a promise of approval. LVR bands can move based on valuation risk, lease strength (WALE), borrower financials and lender appetite at the time.
| Scenario | Indicative LVR band | Indicative deposit band | Why it lands there |
|---|---|---|---|
| Mainstream industrial / warehouse Standard building, strong location, leased or owner-occupied |
~65–70% | ~30–35% | Broad buyer/tenant pool + clearer valuation evidence. |
| Strong investment lease Quality tenant + longer WALE + clean net lease |
~70–75% (strong cases) | ~25–30% | Income is more “bankable” and valuation confidence improves. |
| Neighbourhood / strip retail Good catchment, sensible tenant mix |
~60–70% | ~30–40% | Tenant quality and concentration risk can widen outcomes. |
| Office (prime / owner-occupied) Strong demand location, functional space |
~60–70% | ~30–40% | Office underwriting can be sensitive to vacancy and capex assumptions. |
| Secondary office or short WALE Higher vacancy risk, incentives, or leasing uncertainty |
~50–65% | ~35–50% | Lenders protect against longer vacancy / higher incentives and valuation volatility. |
| Specialised assets Niche use, harder to repurpose, thin buyer pool |
~50–65% | ~35–50% | Higher downside risk if the tenant leaves or the use changes. |
| Vacant / value-add / lease-up Income not yet stable |
~50–60% (often) | ~40–50% | Credit relies on assumptions; lenders prefer more equity and liquidity buffer. |
| SMSF LRBA purchase Limited-recourse structure + stricter lender policy |
~60–70% (case-dependent) | ~30–40% + costs | Policy is more conservative; fund liquidity and buffers matter heavily. |
If you want to see how deposit size changes your repayments and DSCR buffer, model the numbers in the Commercial Property Calculator, then compare lender policy with a Commercial Mortgage Broker.
5) Valuation risk: the most common reason deposits blow out
In commercial lending, the lender will usually base the LVR on the valuer’s market value. If the valuation is below the contract price, the lender doesn’t “split the difference” — the shortfall typically becomes extra cash you need to contribute.
A simple example (why buffers matter)
Contract price: $1,500,000
Valuation: $1,400,000
Max LVR: 70%
Max loan = 70% × $1,400,000 = $980,000
Required cash toward price = $1,500,000 − $980,000 = $520,000 (plus costs)
That’s why experienced borrowers design the deal so it still works if the valuation is 5–10% lower than expected. In softer or more uncertain markets, that variance can be the difference between a smooth settlement and an urgent scramble for cash. If you want a lender lens on current valuation sensitivity by sector, see the Commercial Property Market Update.
How to reduce “valuation shock” before you sign
- Don’t rely on maximum leverage. Build a cash buffer so the deal still works if value is lower.
- Start lender-fit early. A broker can align the property with a lender who is comfortable with your asset type and lease profile before you pay for valuation.
- Be realistic on income. If rent is above market, or the tenant is weak, expect valuation conservatism.
- Match timelines. If your contract settlement is tight, confirm valuation and credit steps early to avoid extensions.
Start with the Business Loan Eligibility Check. It’s a fast way to see whether the likely constraint is deposit/LVR, DSCR, or documentation — before you sink time into the wrong lender path.
6) Costs beyond deposit: what to budget for
A commercial purchase isn’t just “deposit + loan”. Many borrowers have enough deposit for the headline LVR, but get squeezed because they didn’t budget for transaction and set-up costs. The exact mix depends on state, structure, asset type and how the deal is documented.
- Stamp duty (state-based) and registration costs
- Legal fees (purchase + loan documentation)
- Valuation and quantity surveyor (if required)
- Lender fees (application, line, settlement fees)
- Due diligence: building/engineering, strata records, lease review
- GST or settlement adjustments (case-dependent)
- Leasing costs / incentives if the property is vacant or re-letting is likely
- Fit-out / capex reserve (especially for office or specialised stock)
- Insurance and initial compliance costs
- Liquidity buffer (so the deal stays safe after settlement)
We’re not accountants or solicitors — confirm duty/GST/structure advice with qualified professionals. If you’re funding via SMSF, review the proof and timeline complexity in our SMSF commercial property case study.
7) Tools & next steps
The fastest way to avoid surprises is to combine numbers + policy: model your DSCR and repayments, then sanity-check the likely LVR band for your asset and lease. If the deal is tight, the right structure (and lender) matters more than chasing a headline rate.
Use the Commercial Property Calculator to stress-test income and repayments under a conservative scenario.
Read the Commercial Property Finance Guide for a plain-English overview of LVR, DSCR, leases, covenants and timelines.
Speak with a Commercial Mortgage Broker to compare lender policy and package the submission properly.
See a real structure, lender path and documentation flow in our SMSF commercial property case study. (SMSF LRBA policy is often more conservative on LVR, so buffers matter.)
Not sure whether deposit/LVR or DSCR will be the binding constraint? Start with the Business Loan Eligibility Check and we’ll confirm the clean next step.
Want a lender-fit view on deposit/LVR, valuation sensitivity and DSCR buffers? Talk to a Commercial Mortgage Broker Australia or call 0407 908 024.
General information only — always confirm legal and tax details with qualified professionals.
FAQs
What deposit do I need for a commercial property loan in Australia?
It depends on the property type, location, lease strength (WALE/tenant), and your financials. Many mainstream deals are structured around roughly 30–40% deposit plus costs (around 60–70% LVR), while stronger cases can be higher and higher-risk assets often need more equity. The safest approach is to plan a buffer for valuation variance and DSCR stress testing.
What is LVR and how is it calculated for commercial property?
LVR (Loan-to-Value Ratio) is the loan amount divided by the property value, usually the lender’s valuation. Example: a $700k loan on a $1m valuation is 70% LVR. Your deposit percentage is the reverse: 100% minus the LVR. LVR matters because it influences pricing, conditions, covenants and how the deal behaves at annual review.
Do lenders use the contract price or the valuation for LVR?
Most lenders base LVR on the bank valuation. If the valuation is lower than the contract price, the lender generally won’t increase the loan just to match the purchase price. The shortfall usually becomes extra cash you contribute (plus costs). That’s why borrowers often plan for a 5–10% valuation buffer on commercial purchases.
Can I get 80% LVR on a commercial property?
Sometimes, but it’s not the norm. Higher LVRs tend to be reserved for very strong overall profiles (mainstream property, strong location, clean lease or strong owner-occupier financials). Even when available, higher leverage can come with stricter conditions, tighter DSCR assessment and less tolerance for valuation variance. Many borrowers choose a lower LVR to stay comfortable.
How does the lease (WALE and tenant strength) affect maximum LVR?
A stronger lease can improve financeability because it reduces income uncertainty. Lenders look at tenant covenant, WALE, rent reviews, outgoings recovery, options and any unusual clauses. Long, clean leases with reliable tenants can support higher LVRs, while short or messy leases can reduce LVR or increase conditions. Options help, but lenders often prefer longer “firm” terms.
If I have a big deposit, can DSCR still stop the loan?
Yes. A bigger deposit usually reduces the loan amount (which helps DSCR), but the lender still needs the income to service the proposed debt under stressed assumptions. If the property is low-income, vacant, or the lender applies haircuts, DSCR can still be the binding constraint. That’s why it helps to model repayments and DSCR before you lodge the application.
Can I use equity in another property as my deposit?
Potentially, yes — some lenders allow additional security (sometimes called cross-collateralisation) so you don’t need as much cash. This can be useful, but it increases risk because another property is tied to the loan. It also adds valuation and documentation steps. A broker can compare whether standalone security, additional security, or a different lender tier is the cleanest option for your goals.
Do commercial loans require larger deposits for vacant properties?
Often, yes. Vacant property is higher risk because the lender can’t rely on a proven lease income stream. Credit may underwrite a conservative market rent, assume longer vacancy, and require a clear lease-up plan and cash buffer. This frequently pushes acceptable LVR lower until the income is stabilised. If the plan is “buy vacant then lease”, structure and lender selection become more important.
What costs should I budget for besides the deposit?
Common costs include stamp duty (state-based), legal fees, valuation fees, lender fees, and due diligence reports. Depending on the deal, GST or settlement adjustments, fit-out/capex reserves, and leasing incentives may also matter. Because costs vary by structure and transaction type, confirm the final numbers with your solicitor and accountant and keep a liquidity buffer so the loan stays safe after settlement.
How can a broker help with deposit and LVR strategy?
A broker can compare lender policies by asset type, anticipate valuation sensitivity, and package the submission around what credit will actually test: LVR, DSCR, lease risk and borrower strength. The result is fewer “surprise” conditions late in the process and a structure that stays comfortable at annual review. If you want a lender-fit view quickly, speak with Rate Challenge’s commercial team.