What is LVR?

The mortgage industry is a vast world with a language, full of jargon and acronyms, all its own. One of the many acronyms bandied about is ‘LVR’, which stands for ‘loan-to-valuation ratio’.

So, what does that mean?

When 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 mortgage product, the loan-to-valuation ratio (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 the amount you need to borrow is $400,000

The loan is 80% of the property value,

So, your LVR is 80 per cent.

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 per cent LVR, or higher with lenders mortgage insurance (LMI), dependant on the circumstances of the borrower.


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