Lenders use it to determine risk when assessing loan applications, so here’s a quick summary of what you need to know about LVR.
What is it?
LVR stands for Loan to Value Ratio. Simply put, it’s a comparison of how much you’re borrowing with how much the property you’re purchasing is worth.
How is it calculated?
LVR is calculated by dividing the loan amount by the purchase price or valuation of the property and multiplying it by 100.
For example, a $240,000 loan to buy a property valued at $300,000 would have an 80% LVR (240,000 divided by 300,000 multiplied by 100).
LVR is important to lenders because the lower the LVR is, the lower the risk is to the lender.
What types of loans does it apply to?
LVR is used by lenders to calculate risk on all sorts of different types of home loans including;
Home Loan Guide