What is LVR?
LVR is a term that is used a lot when it comes to finance. LVR is the Loan to Value Ratio. This ratio is used by lenders when determining how much you can borrow.
This ratio allows the lender to determine your risk when it comes to borrowing. The higher the LVR, the higher the risk.
The LVR is calculated by dividing the value of the property by your deposit to determine how much you need to borrow.
For example, if you are buying a property that is $500,000 and you have a deposit of $100,000 (20% deposit), you need to borrow the balance of $400,000. This means your LVR is calculated by dividing $400,000 by $500,000 giving you a percentage figure of 80%.
An LVR of greater than 80% typically indicates that you have less than a 20% deposit. Depending on the lender, you may not be deemed a good risk for them to loan you the money.
If you would like more information on LVR, talk to us. We can work through this ratio and also help explain what other factors the lenders are looking at.