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What does LVR mean?

Lenders use it to determine risk when assessing loan applications, so here’s a quick summary of what you need to know about LVR.

What is it?

LVR stands for Loan to Value Ratio. Simply put, it’s a comparison of how much you’re borrowing with how much the property you’re purchasing is worth.

How is it calculated?

LVR is calculated by dividing the loan amount by the purchase price or valuation of the property and multiplying it by 100.

For example, a $240,000 loan to buy a property valued at $300,000 would have an 80% LVR (240,000 divided by 300,000 multiplied by 100).

LVR is important to lenders because the lower the LVR is, the lower the risk is to the lender.

What types of loans does it apply to?

LVR is used by lenders to calculate risk on all sorts of different types of home loans including;

Standard home loan – LVR is calculated by subtracting your deposit from the purchase price and dividing the remainder by the property value.

Refinancing – the lender uses their own valuation of the property to calculate LVR because the price you paid for the property may no longer be relevant.

Off-the-plan – because the value may change by the time the home is built, the lender uses either the purchase price or valuation to calculate LVR, whichever is lower.

Favourable purchase (between family members) – the lender also chooses the lower amount between purchase price and valuation.

For units/apartments that are considered to be high density, then LMI may apply if the LVR is more than 70%. Speak with our team if you want to check.

Still not crystal clear on LVR? Contact us at Tiimely Home to assess your individual needs.

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Our home loans are subject to credit criteria and eligibility requirements. Home loan interest rates are for new customers only and can change. Our comparison rates are based on a $150,000 loan amount over a 25 year term. They factor in fees associated with applying for the loan; ongoing fees and fees associated with leaving the loan. Our fixed loans roll to a variable principal and interest rate at the end of the fixed term. If the interest only period is not specified, the comparison rate is calculated on a one year period.

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