What is the loan to value ratio?

A family dog is sitting at the top of a flight of stairs, the stairs are representative of the loan to value ratio in the home lending process.

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 valuation 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 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 $1,000,000, and you need to borrow $800,000 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 geographic areas.

Most lenders will finance 80% LVR, or higher with lenders’ mortgage insurance (LMI), while alternative document loans may be limited to 60% LVR without LMI.

If you need further information, or would like to get the ball rolling on your home loan application, speak to your trusted Mortgage Broker today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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