LVR Glossary

What Is LVR?

LVR stands for Loan-to-Value Ratio. It expresses the amount borrowed as a percentage of the property's value.

For example, if you borrow $600,000 against a property valued at $750,000, your LVR is 80%.

LVR is commonly considered when lenders assess property loans. A lower LVR generally means the loan represents a smaller proportion of the property's value, although lending decisions depend on many factors.

Loan-to-Value Ratio

Loan-to-Value Ratio compares a loan amount with the value of the property securing that loan.

It is normally expressed as a percentage.

The property value used in a lending assessment may be based on a valuation or another value accepted by the lender.

What Is a Loan Amount?

The loan amount is the amount borrowed from a lender.

When calculating LVR, the loan amount is compared with the relevant property value.

Property Value

Property value is the estimated value of the property used when calculating LVR or assessing a loan.

A lender may use an independent valuation or another accepted valuation method rather than simply relying on the purchase price.

What Is a Deposit?

A deposit is the amount contributed toward purchasing a property from your own available funds.

Ignoring transaction costs and other adjustments, a larger deposit generally means borrowing a smaller proportion of the property's value.

What Is Home Equity?

Home equity is the difference between the current property value and the outstanding loan balance.

The amount of equity that may be available to borrow against depends on lender requirements and the resulting LVR.

What Is LMI?

LMI stands for Lenders Mortgage Insurance. It is insurance that may protect a lender against certain losses if a borrower defaults.

Depending on the lender, loan product and borrower circumstances, LMI may apply when borrowing at a higher LVR.

There is no single LMI amount that applies to every borrower. Actual costs can depend on the lender, insurer, loan amount, property and other factors.

LVR Threshold

An LVR threshold is a percentage at which lending conditions, pricing or requirements may change.

Thresholds differ between lenders and loan products, so a particular percentage should not automatically be treated as a universal rule.

LVR Band

An LVR band is a range of LVR percentages used to group loans.

Lenders may use different LVR bands when determining rates, eligibility, fees or other lending conditions.

Maximum LVR

Maximum LVR is the highest loan-to-value ratio a lender or loan product may allow under its applicable criteria.

Maximum LVR can vary based on the borrower, property, loan purpose, location and other lending criteria.

Current LVR

Current LVR compares your outstanding loan balance with the current relevant value of the property.

LVR for Refinancing

When refinancing, LVR can be calculated by comparing the amount being refinanced with the relevant property value.

A lender may reassess the property and borrower as part of the refinance application.

Investment Property LVR

Investment property LVR describes the relationship between the loan secured against an investment property and its relevant value.

Investment lending can have different eligibility, assessment, pricing and deposit requirements depending on the lender and circumstances.

Construction Loan LVR

Construction loan LVR considers the relationship between borrowing and the relevant value used for a construction project.

Construction lending can involve staged payments, valuations and lender-specific requirements.

Property Valuation

A property valuation is an assessment of the property's value. Lenders may use valuations when assessing the security supporting a loan.

The valuation used for lending purposes may differ from a property's purchase price or an owner's estimate of its market value.

Appraised Value

Appraised value refers to an estimated value assigned to a property through an appraisal or valuation process.

The method used to determine the value can vary depending on the purpose and provider of the valuation.

Equity Contribution

An equity contribution is the portion of a property purchase or project funded from your own funds or available equity rather than new borrowing.

Negative Equity

Negative equity occurs when the outstanding debt secured against a property is greater than the property's current value.

Changes in property values and loan balances can affect the amount of equity a homeowner has.

Usable Equity

Usable equity refers to equity that may potentially be available for borrowing while keeping the resulting loan within a lender's acceptable LVR and other lending criteria.

It is not necessarily equal to total home equity.

LVR Calculator

An LVR calculator estimates the loan-to-value ratio using the loan amount and property value entered by the user.