What is LVR?

Any general questions you might have in regards to loans and finance.
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Ally
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Joined: Wed Jul 17, 2013 7:32 pm

What is LVR?

Post by Ally »

Hello,

I am an Australian and I live in New South Wales. I have been working for a museum for the past two years now. I live in a rented apartment currently and it is half an hour drive away from the place I work. I am looking for a place closer to the museum.

The houses that I have looked into cost about $600,000 on average. I do not have that much of cash in hand. In fact, I have only about $200,000 as a deposit in my account and I do not want to spend it all at once. That is why I am seeking a loan. Can anyone in this forum give me an idea on whether I can get a loan?

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Otto Dargan
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Re: What is LVR?

Post by Otto Dargan »

Hi and welcome to the forums Ally.

Many borrowers have a problem similar to yours. The lenders have a term for the ratio of the loan to the value of the property used as security for the loan. It is called Loan to Value Ratio (LVR), sometimes referred to as LTV as well.

The LVR is calculated by dividing the loan amount that you wish to borrow divided by the purchase value or the valuation of the property and multiplying it by 100. In most cases, the purchase price is equal to the valuation of the property. If those figures are different, the lenders consider whichever is the lower to calculate the LVR.

For example, in your case, suppose the house you are planning to buy has a purchase price of $600,000. If you want to borrow $450,000, then your LVR would be calculated as follows:
$450,000 / $600,00 * 100 = 75%.

Here the LVR is equal to 75%. If you meet the standard lending criteria, then the lenders may easily lend up to 80% LVR (i.e. $480,000).

Cheers,
Otto
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Ally
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Joined: Wed Jul 17, 2013 7:32 pm

Re: What is LVR?

Post by Ally »

That is good to know. However, I was thinking of borrowing more than 80%. Could I do that? What would be the maximum LVR that I could borrow?

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Otto Dargan
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Re: What is LVR?

Post by Otto Dargan »

Hi Ally,

It is possible to get approved for a LVR higher than 80%. If the borrower is in a strong financial position then it may be possible to borrow even up to 95% LVR.

However, most lenders ask their borrowers to pay an insurance if the LVR is greater than 80%. The insurance will cover the lenders from any possible default that might occur in the future. However, the insurance premium has to be paid by the borrower. This insurance is called Lenders Mortgage Insurance (LMI).

If you would like to know more about LVR and home loans then you can check out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Ally
Posts: 48
Joined: Wed Jul 17, 2013 7:32 pm

Re: What is LVR?

Post by Ally »

This was very helpful. It is a relief to know that the lenders do provide more than 80% LVR. Now I will start looking for a suitable property for me. Thank you so much.

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arnie
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Re: What is LVR?

Post by arnie »

Hey there,

I live in New South Wales and I recently found a place that is near my workplace. It is valued at $800,000. I was going through this thread and found that you were talking about LMI. I was trying to find out how much LMI I would have to pay if I borrow 90% LVR. Could anyone help me?

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Otto Dargan
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Re: What is LVR?

Post by Otto Dargan »

Hi and welcome arnie!

LVR is one of the major factors in determining the LMI. However, the size of LMI depends upon various other factors such as:
  • Whether you are purchasing or refinancing the property.
  • Whether you are purchasing it for residence or as an investment.
  • Whether you have at least 5% genuine savings.
  • What your profession is. For low-risk professions such as doctors, engineers, lawyers and accountants, it may be possible even to have LMI waived altogether.
  • The term of your loan.
You could estimate your LMI yourself with the help of our LMI Calculator.

However, keep in mind that the LMI calculator may not include all the fees and charges like stamp duty and legal fees that you might have to pay in the process of applying for a loan. In addition to that, the LMI will also depend upon the lender that you are planning to borrow from, as well as the mortgage insurer. It would be better for you to try to find a lender that best fits your situation and matches your criteria.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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arnie
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Re: What is LVR?

Post by arnie »

Thank you so much. The LMI calculator does give me a clearer idea of how much LMI I would have to pay. Now I also understand that it can vary according to other factors beside LVR. I will definitely call you to understand more about it now that I have decided to purchase the house I have been looking at.

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