Understanding LVR doesn’t have to be complicated. Loan-to-value ratio (LVR) is a measure used to assess the risk of a loan. It is calculated by dividing the loan amount by the value of the property that is being used as collateral for the loan.
For example, if a person is applying for a loan to purchase a house that is worth $500,000 and they are borrowing $400,000, their would be 80%. This means that the person has put down a 20% deposit and is borrowing the remaining 80% of the purchase price.
A lower LVR generally indicates a lower-risk loan, as the borrower has a greater stake in the property. As a result, loans with lower LVRs typically have lower interest rates.
On the other hand, a high LVR indicates a higher-risk loan, as the borrower has a smaller stake in the property. As a result, loans with high LVRs typically have higher interest rates.
Some brokers will try and push the LVR sky-high, meaning that if you have a property development worth a million dollars, they’ll try and leverage you all the way to 80 or 85% of the value of your property.
At UCapital, the last thing we want is to put you in financial distress. We are here to give you the money you need when you need it but at the same time not put you over that tipping edge.
We are very conscious of getting you into a solution with a clear exit!
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