LVR – What Is It and What Does It Mean for You?

When it comes to home loans, there’s one important number that could make a big difference in your financial options: LVR. But what exactly does LVR stand for, and why should you care?

An image with the words Loan to Value Ratio displayed

What is LVR?

LVR stands for Loan to Value Ratio. In simple terms, it’s the balance of your home loan compared to the value of your property. It’s a key figure lenders use to assess how much of a risk they’re taking on when you borrow money. The lower your LVR, the better it looks to lenders.

Here’s how it works:

To calculate your LVR, simply divide your current home loan balance by the value of your home and multiply by 100. For example, if your home loan is $800,000 and your property is valued at $1,000,000, your LVR would be 80%.

What Does a Lower LVR Mean for You?

You might be wondering, “So, why does this matter?” Well, a lower LVR can open up a range of benefits for you. Let’s break down a few key advantages:

Access to More Lenders A lower LVR typically means you’re considered a less risky borrower, so you might find yourself eligible for a wider range of lenders who are more willing to offer you a loan.
No Mortgage Insurance If your LVR is under 80%, you could borrow without needing to pay for mortgage insurance, which can save you hundreds or even thousands of dollars over the life of your loan.
Lower Interest Rates Some lenders offer better interest rates to borrowers with a lower LVR because they’re seen as less of a financial risk. This could mean savings for you in the long run!
Access to Equity With a lower LVR, you may be able to access up to 80% of your home’s value, which can help fund renovations or even purchase an investment property.

Is Your Bank Rewarding You for Your Low LVR?

If you’ve worked hard to pay down your loan and are sitting on a low LVR, it’s worth checking if your current lender is rewarding you with the best rates and terms. Sometimes, your bank might not automatically offer you better conditions just because your LVR is low, so it’s important to check and shop around to ensure you’re getting the best deal.

Not sure if your bank is giving you the best deal for your low LVR? Get in touch, and we can help you explore your options to make sure you’re making the most of your home’s value!