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What is LVR? What does it mean for you?

LVR, or loan-to-value ratio, is the size of your home loan expressed as a percentage of your purchase price.

So if you borrow $400,000 to buy a $500,000 property, your LVR would be 80% (as $400k is 80% of $500k).

LVR and deposit are opposite sides of the same coin: when your LVR is 80%, your deposit must be 20%.

Most lenders prefer borrowers to have a deposit of at least 20%. So if your LVR is above 80% (i.e. if your deposit is below 20%), you may:

  • Have fewer borrowing options

  • Be charged a higher interest rate

  • Have to pay lenders mortgage insurance (LMI)

That said, buying a home with an LVR above 80% can sometimes be beneficial, as it lets you enter the market ahead of schedule.

To discuss how LVR works and what LVR would be suitable for your personal situation, reach out to us for comprehensive review.


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