What is LVR anyway?

LVR stands for Loan to Value Ratio, and it's one of those terms that gets thrown around a lot in the mortgage world. Once you understand it though, it's actually pretty simple.

Your LVR is the percentage of the property's value that you're borrowing.
A quick way to work it out is as follows:

Loan ÷ Value of property = LVR
For eg, a $640k loan ÷ $900k property = 71% LVR

The lower your LVR, the less risk you represent to a lender. That's because there's more of a buffer between what you owe and what the property is worth. Lenders love a low LVR because even if property values dip, they're still well-covered.

The magic number you'll hear most often is 80%. If you can come in at or below 80% LVR, you'll generally avoid Lenders Mortgage Insurance (LMI) - a sometimes hefty one-off cost that protects the lender (not you) if you can't meet your repayments.

If your deposit is less than 20%, don't panic - plenty of people buy with a higher LVR. You'll just need to factor in LMI or look at options like a guarantor loan which we can assist with.

Your LVR also changes over time as you pay down your loan and as your property value grows . This is how many investors are able to access equity and grow their portfolio without needing a fresh cash deposit.