Ever Heard the Term Loan-to-Value Ratio (LVR) and Wondered Why it Matters?
Your LVR is the percentage of your loan compared to the property’s value. For example, if you’re buying a $500,000 home with a $100,000 deposit, your loan is $400,000 — meaning your LVR is 80%.
Why Does it Matter?
- A lower LVR can give you access to better interest rates.
- Borrowing over 80% often means paying Lenders Mortgage Insurance (LMI).
- It’s one of the key factors lenders use to assess risk.
Example: Let’s say you bought a property, and over 18 months it increases in value by 20%. You could top up your loan, where the new valuation helps keep your LVR at 80% or lower. Since valuations differ between lenders, refinancing with one who gives a more favorable valuation can reduce your LVR — and potentially your interest rate. That’s a smart way to make your money work harder.
Not sure where your LVR sits or how to take advantage of it? Let’s chat!