What is an LVR?
LVR stands for loan-to-value ratio and describes the value of a property in comparison to the amount being borrowed through a mortgage. The LVR is calculated as a percentage and banks and other lenders use it to assess the risk of accepting a loan application. A lower or good LVR of 80% (amount being borrowed excluding the deposit) or lower is generally considered as beneficial to lenders as it is less risky of a default.
Lower LVR’s can allow you to avoid lenders mortgage insurance costs and also unlock lower interest rates. The LVR is calculated by using the below formula:
(Loan Value / Property Value) x 100 = LVR
Using your LVR to get a lower interest rate
As interest rates rise many home owners are dealing with increased financial stress which are being compounded by inflation costs in regular household items. However, what most lenders won’t tell you is that the capital appreciation of your home can be used to reassess your LVR. This could then lead to lower interest rates and savings for many home owners.
On average we have seen growth across Australia of a minimum of 5% on all properties. In many cases this is far greater as infrastructure and development have occurred. This means that the Property Value has likely increased meaning that you’re Loan Value Ratio is likely to be better than when you initially purchased.
Step by step guide on how to do the same
- Get a valuation done on your property to assess any capital gains
- Speak with your financial broker and current or competing lender and let them know that you are looking to access lower rates due to your new LVR
- Once you have an offer speak with other potential lenders to see whether you can get an even better deal
- After you have selected the best solution make sure you calendarize a future date to review your options
For a quicker solution to getting the best rate for your current LVR contact us and we can action steps 1 to 4 on your behalf.
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