The mortgage industry is a wide, wondrous world with a language all of its own. One of the many acronyms bandied about is ‘LVR’, which stands for ‘Loan to Value Ratio’. Here’s what it means.
When you are working out what amount you can borrow to purchase a property, the size of deposit you need to save, and whether you are eligible for a particular mortgage product, the LVR is one of the most important considerations.
In the simplest terms, the LVR is the percentage of the property’s value, as assessed by the lender that your loan equates to.
So, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 to pay for it, the loan is 80% of the property value, making your LVR 80%.
LVR is important because different lenders and loan types have different maximum LVRs and some lenders will only lend up to a certain LVR for small properties or properties in certain areas.
Most lenders will finance 80% LVR, or higher with Lenders Mortgage Insurance (LMI), while low documentation loans may be limited to 60% LVR without LMI.
