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What is the terminology LVR?

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LVR stands for “Loan to Value Ratio” and it is calculated by dividing the loan amount by the value of the property. The value of the property is determined by the lenders valuation process and will be the lower amount of either the purchase price or the valuation conducted by the bank. 

The ratios are used to calculate risk and although most lenders will have limits to what their LVR is, many lenders will lend owner occupiers up to 90% LVR and a few will even lend up to 95% LVR. LVR’s are assessed as part of the determination of a lenders own credit rating. In order to lend above lending policy LVR’s lenders will often insure their risk with a Lenders Mortgage Insurance Policy. To avoid Mortgage Insurance you normally have to have a 80% LVR or less
To work out the LVR, divide the amount you are borrowing into the value of the property e.g.$200,000 (Loan Amount) $250,000 (Property Value) = 80% LVR
To a lender, a higher LVR is a riskier proposition than a lower LVR and they will look at loans when approving them accordingly.

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