What does LVR mean?

LVR stands for ‘loan to value ratio’, and it’s a comparison between how much you’re borrowing and how much the property you’re purchasing is worth. Lenders use it to determine risk when assessing loan applications.

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.

When does it apply?

It’s used to calculate risk associated with 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 as the property price you originally paid may no longer be relevant.
• Off-the-plan – As the value may change by the time it’s built, the lender uses either the purchase price or valuation to calculate LVR, whichever is lower.
• Favourable purchase (between family members) – In these cases, the lender also uses the lower value of either the purchase price or valuation to calculate LVR.

For units or apartments that are considered high density, LMI may apply if the LVR is more than 70%.

If you still have any questions or need a little more information, you can contact us at Tiimely Home to assess your individual needs.