Buying property almost means learning a new language. One of the most common acronyms used by banks, lenders, mortgage brokers, real estate agents, accountants and financial planners is LVR.
But what does LVR mean?
Definition of LVR
LVR is an acronym that stands for ‘loan to value ratio’. LVR is calculated by how much of a deposit (savings, equity, or lack of) you have towards your purchase price. Simply divide the value of the property by the amount of the loan and you have the LVR.
LVR is conveyed as a percentage of the property’s value.
Example of how to calculate your LVR
James wants to purchase a property valued at $750,000 in Ashburton, Victoria. He will need to borrow $600,000 to buy the property. The loan is then 80% of the value of the property value, making the LVR James is looking to borrow 80%.
Why understanding LVR is important
When you are purchasing a property or refinancing your loan understanding of what LVR means will help you make better decisions and potential save you thousands of dollars.
In major metro areas lenders will often let you borrow up to an 80% LVR without charging you Lenders Mortgage Insurance (LMI).