LVR stands for Loan to Value Ratio. It is the percentage of money that you intend to borrow compared to the overall value of the property.
To work out the LVR, divide the amount you are borrowing into the value of the property e.g. It can be calculated using the simple formula: (Property Value – Deposit)/Property Value x 100%
The LVR on your loan is very important as it determines the amount a lender will loan to you. If the LVR on your loan is higher than 80%, in most circumstances you will be required to pay Lenders Mortgage Insurance (LMI).
There are some exemptions to paying LMI when over 80% LVR, if you are in the Medical Sector some lenders will offer finance up to 90% LVR with out LMI. Some banks and lenders have special promotions allowing up to 85% LVR with no LMI. (Correct at time of writing – Subject to change at any time)
For example if you were to purchase a $300,000 unit and you had a $60,000 deposit. Then you would be borrowing ($300,000 – $60,000) $240,000. The LVR would be ($240,000/$300,000) 80%. If you only had a $30,000 deposit then the LVR would be ($270,000 / $300,000) 90%.
