Loan to value ratios
Loan To Value Ratios
The mortgage industry is a wide, wondrous world with a language all of its own. One of the many acronyms used is ‘LVR’, which stands for ‘Loan-to-Value 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 LVR is one of the most important considerations.
In the simplest terms, the LVR is the ratio of your proposed loan amount divided by the property’s value, expressed as a percentage.
So, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 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 certain types of properties or properties in specific areas. In some cases, LVR can also impact the interest rate that the bank can offer you.
Most lenders will finance 80% LVR, or higher with Lenders Mortgage Insurance (LMI).
Contact Priority Home Loans Newcastle to learn more about how LVRs and lenders mortgage insurance works.