What is Loan to Value Ratio?
Loan to Value Ratio is the percentage of your property’s value that you are borrowing. For example, if you have a $600,000 apartment and you borrow $450,000 then you have a 75% loan to value ratio.
Calculate your loan value ratio
- Your loan to value ratio (LVR) refers to how much of your home’s value you are borrowing
- The bigger your deposit, the lower the loan to value ratio
- For instance, if you buy a $500,000 home your loan value ratio is 80%
- If your loan to value ratio is above 80% you can expect to pay lenders mortgage insurance
- Having a high loan to value ratio means you’re borrowing a lot more – and that can leave you vulnerable to rising interest rates
Assessment of Property Value
In order to work out your loan to value ratio, the property you are looking to purchase must first be valued by a professional valuer.
A valuer will take into account:
- The size of your home as well as the size of the land the property stands on
- The type of property (eg: unit, house, semi, commercial office etc)
- The location of the property
- The condition of the property
Impact of Loan to Value Ratio on mortgages
The lower the loan to value ratio, the less risk you pose to the lender. This can mean being rewarded with lower interest rates, higher ongoing discounts and better package deals.
Use our loan to value calculator to work out your borrowing ratio.