LVR stands for Loan to Value Ratio and is the amount of money you borrow for a home loan compared to the value of the property and expressed as a percentage. Lenders use this calculation to determine the risk factor of the home loan.
You can find this out by dividing the amount you’ll need to borrow to purchase a property by the property’s value.
If you buy a property for $500,000 and need a loan amount of $300,000 to purchase it, your LVR will be 0.60, or 60% when expressed as a percentage.LVRs are important when it comes to getting a mortgage.
Generally, the lower the LVR, the lower the risk you present to your lender. Also, lower LVRs often qualify for cheaper interest rates. Generally, a loan of 80% or less is recommended, as borrowing more leads to more fees and charges and the possibility of higher interest rates.