The LVR is the loan to value ratio lenders use to assess the risk with lending you a home loan. Learn how you can minimise your risk and get the best value for your loan.
LVR or ‘loan to value ratio’ is a common acronym which home buyers will see a lot when searching for the best property and lending option for them. It is a way for lenders to calculate the risk that they will incur on the value of a home loan they are offering. It is essentially the value of the property versus the value of the home loan and lenders will not typically offer a home loan to applicants who score over 80% however there are exceptions which incur a lenders mortgage insurance fee. There’s an extensive range of information available around LVR and tools such as an LVR calculator to help guide you.
So what does LVR mean in real terms for home loan applicants?
If you are looking to buy a home then you know that you will have to save for a deposit. This is home buying 101. The value of your deposit shows your lender a lot about you as a viable home loan applicant and one of the things it reveals is the LVR on the property you intend to purchase. The bigger your deposit, obviously, the better your lending options and approval rating becomes. Lenders enjoy offering home loan products to applicants with a strong saving history, strong financial security and the lowest LVR possible.
Judy wants to buy an apartment close to the city. The value of the property is currently $250 000. She has worked hard to save a deposit of $25 000. When she applied for a home loan for the value of $225 000, her lender calculated her LVR as 90%. This equates to a high risk loan as Judy has not saved more than 10% of the property value she intends to purchase.
If Judy was to continue to hunt for property and found another apartment offered at a lower price than her original $250 000 then her LVR score would fall due to the value of her current deposit. Or she could continue to save until she had reached at least 20% of her originally intended property’s value. Lenders will not typically offer a home loan to applicants who score over 80% however there are exception which include a lenders mortgage insurance levy to cover the possibility of defaulting on a home loan offered to applicants with an LVR score of 90%.
If you, like Judy, are looking to purchase property then a quick calculation before you apply for your home loan could save you some time and disappointment. Simply take the value of your intended property and remove your deposit amount. If what’s left over is less than 80% of the property’s value then you a strong candidate for a home loan.
LVR or ‘loan to value ratio’ is a common acronym which home buyers will see a lot when searching for the best property and lending option for them. It is a way for lenders to calculate the risk that they will incur on the value of a home loan they are offering. It is essentially the value of the property versus the value of the home loan and lenders will not typically offer a home loan to applicants who score over 80% however there are exceptions which incur a lenders mortgage insurance fee.
So what does LVR mean in real terms for home loan applicants?
If you are looking to buy a home then you know that you will have to save for a deposit. This is home buying 101. The value of your deposit shows your lender a lot about you as a viable home loan applicant and one of the things it reveals is the LVR on the property you intend to purchase. The bigger your deposit, obviously, the better your lending options and approval rating becomes. Lenders enjoy offering home loan products to applicants with a strong saving history, strong financial security and the lowest LVR possible.
Judy wants to buy an apartment close to the city. The value of the property is currently $250 000. She has worked hard to save a deposit of $25 000. When she applied for a home loan for the value of $225 000, her lender calculated her LVR as 90%. This equates to a high risk loan as Judy has not saved more than 10% of the property value she intends to purchase.
If Judy was to continue to hunt for property and found another apartment offered at a lower price than her original $250 000 then her LVR score would fall due to the value of her current deposit. Or she could continue to save until she had reached at least 20% of her originally intended property’s value. Lenders will not typically offer a home loan to applicants who score over 80% however there are exception which include a lenders mortgage insurance levy to cover the possibility of defaulting on a home loan offered to applicants with an LVR score of 90%.
If you, like Judy, are looking to purchase
property then a quick calculation before you apply for your home loan could
save you some time and disappointment. Simply take the value of your intended
property and remove your deposit amount. If what’s left over is less than 80%
of the property’s value then you a strong candidate for a home loan.