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How is your LVR (Loan Valuation Ratio) calculated?

When looking into purchasing an investment property(s) the term LVR regularly comes up with lenders and/or mortgage brokers. How many of us know what LVR is and how to calculate it?

LVR is the amount you are borrowing, represented as a percentage of the value of the property being used as security for the loan. When your loan application is being assessed, there is a lot of importance placed on LVR. For example, some lenders require a LVR of 80% or lower, anything higher may result in non approval or will mean that you have to take out mortgage insurance (an added expense).

To calculate the LVR, the loan amount is divided by the purchase price or valuation of the property, then multiplied by 100.

Example - you would like to borrow $380,000 and the property you are using as security is valued at $485,000.

Calculation - $380,000 divided by $485,000 x 100 = 78.35% LVR


Tags: Borrowing | LVR |