What is LVR?
Loan to Value Ratio (LVR) - Loan to Value Ratio (LVR)
This value quantifies the maximum amount a lender will approve against the value
of an asset taken as security for a loan.
Calculate by Dividing loan amount (loan) by the purchase price (value).
Example:
You want to buy a house for AU$ 100,000
You have a deposit of AU$10,000
You need a loan of AU$90,000
Which means you need a LVR of loan amount/purchase price = 90,000/100,000
which is 90%
Above certain levels you may be required to take out additional insurance.
Some companys will not lend you 100% LVR. They may require you to put
down a deposit.
Why do companys not want to lend 100% LVR?
If you have a deposit it shows that you have good financial sense and
have been able to manage your finances well enough to save money. This
is a good indicator of you being able to repay the loan. If you struggle
to save money then you might struggle to repay.
Some companies may value your property lower than the amount being asked
for it, this would mean that you could not borrow the amount you want,
and would be required to put down a bigger deposit.
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