What is LVR?
One of the many acronyms that you may hear bandied about is ‘LVR’, which stands for ‘loan-to-valuation ratio’.
When you are working out what amount you can borrow to purchase a property, the size of deposit you need to save and whether you are eligible for a particular mortgage product, the loan-to-valuation ratio (LVR) is one of the most important considerations.
Here’s what it means.
How do I work out LVR?
In the simplest terms, the LVR is the percentage of the property’s value, as assessed by the lender, that your loan equates to.
So, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 to pay for it, the loan is 80 per cent of the property value, making your LVR 80 per cent.
How is it used, and why is it important?
LVR is important because different lenders and loan types have different maximum LVRs, and some lenders will only lend up to a certain LVR for small properties or properties in certain areas.
Most lenders will finance 80 per cent LVR, or higher with lenders’ mortgage insurance (LMI), while alt doc loans may be limited to 60 per cent LVR without LMI.
Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI) helps Australian homeowners enter the market earlier through allowing you to borrow a higher percentage of a property’s value.
For first home buyers, particularly those struggling to save a deposit but more than comfortable to meet their mortgage repayments, it can be a key tool to break free of the rental trap.
WHEN DOES LMI APPLY?
So if your deposit is less than 20 per cent of the value of the property, and especially if you have no deposit at all, you will need to factor LMI into your home loan.
HOW WE SUPPORT CLIENTS
At Aspiire, we have supported business and clients who are looking to finance property, investments, homes, vehicles and businesses, through:
- Providing pre-approval reports with your buying power, including any LVR and LMI considerations
- Arranging valuation reports to guide you on potential offer prices
- Calculating and recommending finance options
- Arranging fully approved finance
- Arranging value add services such as building and contents insurance, depreciation reports, and legal conveyancing at preferred prices.
At Aspiire Mortgage Brokers, we get more holistic results for our clients. Learn more about how we could help...