The Loan to Value Ratio (LVR) is the percentage of a person’s home loan that can be used for purchasing or refinancing. In simple terms, it is the percentage of the property value of your house to the total amount you borrowed from your bank or lender. LVR is often used by banks and other financial institutions as an indicator of how much debt a person has taken on in relation to their ability to repay it.
In short, as per Lantern by SoFi advisors, “A loan-to-value ratio is a comparison between how much you’re borrowing and the value of the asset that will be used as collateral for that loan”.
How do I work out your LVR?
How do you work out your LVR? Your loan amount is the total value of your loan, including all fees and costs. This amount will be used to calculate your deposit amount, which is what you need to pay upfront before getting a home loan.
If you are unable to secure a deposit in time for application submission, then you can use any other method to prove that you have enough funds available – this can also help lower your LVR and make it easier for banks to approve your application.
If there is still equity after paying off these debts then it becomes easier for borrowers because they’ll have more funds available from their own pocket instead of relying on their lender’s bank account balance which could potentially reduce risk levels associated with lending decisions made by lenders themselves.
What is maximum LVR?
LVR stands for “loan-to-value ratio”. It’s the amount you have borrowed compared to the value of your property. So, if your LVR is 80%, it means that you’ve borrowed 80% of what your home is worth.
If you’re buying an investment property and plan on selling it in a few years’ time, you will generally have a higher LVR than someone who plans on living in their home for many years. This is because there’s more risk involved if you sell an investment property than if you sell a place where you live yourself.
What to do if you have a high LVR
- Get a guarantor. If you have a good relationship with your parents and they have enough money for the deposit, consider getting one of them to be your guarantor on the loan. They’ll need to meet certain criteria and sign an agreement that protects them from any losses.
- Get a co-applicant. Instead of asking for help from family members, maybe someone you’ve been friends with since school or work would be willing to put their name down on another piece of paper? The idea being that if anything went wrong with your application, this person would be responsible for paying back all or most of the loan amount. They may not get any extra benefits, but it could still make all those other lenders happy!
- Lower deposit requirements by SLABS or LVRs—but only do this if you’re 100% sure that this option makes sense for you! If not then try these other methods instead.
If your loan application has been declined because of a high LVR, it doesn’t mean that you can never borrow again. There are many things you can do to work around this issue, including securing additional savings or raising money from family or friends. It might take some extra effort on your part, but it will be worth it when you finally get the home loan that you deserve.