What is LVR? LVR is the Loan to Value Ratio calculation. This is used by lenders, mortgage brokers and the lender’s mortgage insurance providers to determine the equity in a property.
The Loan to Value Ratio (LVR) is calculated by taking a loan amount, dividing it by the value of a property and multiplying it by 100. For example:
Mr and Mrs Smith own a property that is valued at $500,000. They have a loan secured by the property of $280,000. To calculate the LVR we would divide the loan amount by the property value and then multiply it by 100: $280,000 / $500,000 * 100 = 56% LVR.
Higher LVR loans are deemed higher risk as there is less equity available, which is concerning in a declining property market.
*All information is current as at July 2020