Glossary: What is LVR?
This article is part of our Glossary Series, helping you understand some of the many acronyms you may have come across within the mortgage industry. If you come across a term you don’t understand, get in touch and we will add it to our list of definitions.
The mortgage industry is a large and complex world that seems to speak its own language. One of the many acronyms you may have heard being used is ‘LVR’, which stands for Loan to Value Ratio.
When calculating the amount of money you need to borrow to purchase a property, how much deposit you need to save, and whether you are eligible for a particular mortgage product, the Loan to Value ratio (LVR) is one of the most important considerations.
Simply put, the LVR is the amount of your loan compared to the value of your property, expressed as a percentage. For example, if the property you want to purchase is valued at $500,000 and you need to borrow $400,000 to pay for it, then the loan is 80% of the property value which makes your LVR 80% (LVR = loan amount divided by purchase price multiplied by 100):
LVR is important because lenders and different loan types can have varying maximum LVRs, particularly when it comes to small properties or properties in certain areas.
Most lenders will finance up to 80% LVR, and higher with Lender’s Mortgage Insurance (LMI), while Alt Doc loans (also known as Low Doc loans) may be limited to 60% LVR without LMI.
