How do banks calculate the LVR for a refinance?

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Jimmy P
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Joined: Thu Mar 28, 2019 1:53 pm

How do banks calculate the LVR for a refinance?

Postby Jimmy P » Thu Mar 28, 2019 1:55 pm

Hi, I’m looking to refinance our mortgage with NAB. We’re currently paying 4.80% and looking to get a better interest rate. I’m trying to figure out my LVR as I heard that this will affect my chances at approval. How do banks calculate the LVR for a refinance?

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Otto Dargan
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Re: How do banks calculate the LVR for a refinance?

Postby Otto Dargan » Thu Mar 28, 2019 2:56 pm

Hello Jimmy. Welcome to the forums.

Loan to Value Ratio (LVR) is calculated by dividing the loan amount by the actual purchase price or valuation of the property, then multiplying it by 100.

You can use our LVR calculator to find out.

If you’re refinancing a property, the lender will use their own valuation of the property when calculating the LVR.

This is because the price that you paid for the property may no longer be relevant as you may have purchased the property a while ago.


Speak to one of our experienced mortgage brokers by calling us on 1300 889 743 or fill in our free assessment form to get the best interest rate available on the market today.

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

Jimmy P
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Joined: Thu Mar 28, 2019 1:53 pm

Re: How do banks calculate the LVR for a refinance?

Postby Jimmy P » Thu Mar 28, 2019 5:18 pm

Yeah, that makes sense. My LVR based on the estimated current market appraisal is 83%. Will I be charged LMI again?

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Otto Dargan
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Re: How do banks calculate the LVR for a refinance?

Postby Otto Dargan » Thu Mar 28, 2019 6:14 pm

Hi Jimmy,

Lenders Mortgage Insurance (LMI) generally only applies to loans with an LVR of 80% and above. So, yes if you were to apply for a refinance you’ll be charged LMI again.

There are only a few lenders that will approve a refinance for a mortgage between 80% to 90% of the property value.

You can pay down the home loan to below 80% LVR by making extra repayments, avoid the LMI altogether and then look for a better interest rate.


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

Jimmy P
Posts: 3
Joined: Thu Mar 28, 2019 1:53 pm

Re: How do banks calculate the LVR for a refinance?

Postby Jimmy P » Thu Mar 28, 2019 6:48 pm

I’ll be able to pay it down to 80% in a few months. The one thing I’m concerned about is the cost. How much does it cost to refinance?

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Otto Dargan
Mortgage Specialist
Posts: 7728
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: How do banks calculate the LVR for a refinance?

Postby Otto Dargan » Thu Mar 28, 2019 7:34 pm

Hi Jimmy,

The following costs may be applied to your refinance:
  • Borrowing costs: When refinancing your new lender may charge a range of upfront fees.
  • Loan application fees: are charged when you apply for a new home loan.
  • Exit fees: These may apply when you pay out a loan early, usually in the first 3 to 5 years of your term. It could be a percentage of the remaining loan balance or a set amount.
  • Valuation fees: Your lender may charge a fee to have your property valued by a professional property valuer.
  • Settlement fees: Your lender might charge a fee to pay out your current mortgage.
  • Discharge fees: Although exit fees were abolished in 2011, a discharge fee of around $150 to $300 is usually charged by a lender in order to release you from your mortgage.
  • Break costs: You may incur break costs from the lender who financed your current mortgage. These fees apply when you refinance within the fixed period of your home loan. There are no hard and fast rules and the amount tend to vary between lenders.
  • Government fees to register and transfer the property: If you increase your loan as part of your refinance, you may be charged stamp duty depending on your state. Your state’s Land Titles Office will charge a mortgage registration fee to register your mortgage on the title record for the property.
  • Ongoing fees depending on the mortgage you choose: These charges could include monthly account keeping fees, annual fees or fees for redrawing.
  • Lenders Mortgage Insurance (LMI): LMI is a one-off that’s only applicable if you have more than 80% of the purchase price owing on your home loan refinance.
Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a mortgage refinance.

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


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