LVR Calculator Know If You Qualify for a Home Loan

An LVR calculator can quickly give you an idea of your financial standing regarding owning a house, refinancing a mortgage, or maybe buying an investment property. Loan to Value Ratio is one of the first terms thrown at you when getting your loan processed-it is a major factor lenders want to know before they even consider your credit application.

Thus, knowing your LVR up front gives you a feel for what borrowing power you have and some of the costs that may come with it-primarily, costs such as Lenders Mortgage Insurance (LMI) for that borrowing.

Understanding Your LVR

So, this article will give you the basic introductory insight into calculating your LVR and the use of an LVR calculator that is most likely to help an average buyer in the decision-making process concerning acquisition. 

Whether you are just taking your initial plunge into this potentially very lucrative property market or are already quite the seasoned investor, learning more about your LVR could earn you a savings of thousands, perhaps even tens of thousands, in interest and insurance.

So What Is LVR, Anyway? 

The Loan-to-Value Ratio (LVR) is a percentage that states how many dollar amounts of a loan is placed against the property value being purchased: the higher the LVR, the riskier the loan is for the lender.

Formula: 

> LVR= (Loan Amount ÷ Property Value) × 100

For Example: 

•  Property Value = $500,000 
•  Loan Amount = $400,000 
•  LVR = (400,000 ÷ 500,000) × 100 = 80%

3An LVR of 80 %

Benefits of LVR Calculator

An LVR calculator will assist you in the following:

•  Quickly getting your loan-to-value ratio
•  Gain an understanding of whether you would require Lenders Mortgage Insurance (LMI)
•  Aid in determining how much deposit you will need 
•  Assure a greater likelihood of loan approval

Also more likely to use this tool when comparing properties or determining how much you need to save for a future purchase.

How to Start with LVR Calculator

Using our LVR calculator is just easy. You need input two data types since:

1. Property Value – The purchase price or property appraised value

2. Loan Amount – The amount of money you plan to borrow from financial institutions

The calculator calculates your percentage values: If. 

Example:

•  Property Price: $750,000  
•  Loan Amount: $600,000  
•  LVR = (600,000 ÷ 750,000) × 100 = 80%

You’re on the borderline where the LMI tends to kick in.

How to perform a stepwise calculation of LVR

Here are the steps you need to take if you want to learn manually to calculate LVR: 

1. Get the property value in its appraised value 

This can be done through the seller, independent values, or the bank’s valuation.

2. Know your loan amount

This means the actual borrowed amount, without including fees or any extras.

3. Apply the formula

All you need to do is divide the loan amount with the property value and then multiply it by 100 to get the percentage value.

Pro Tip:

However, lenders often rely on their valuation, which may slightly differ from the purchase price, especially in volatile markets.

Reasons LVR is Important for Lenders

Essentially, the LVR has a direct relation with how your home loan is going to be approved or on what terms. Here are some ways in which it helps: 

•  LVR Less Than 80%: Low-risk. LMI probably will not form a requirement and enter better interest rates. 
•  LVR Between 80% and 90%: Medium risk. There would usually be an LMI. Stricter lending criteria apply.
•  LVR Above 90%: High risk. Approval is much harder, LMI premiums high as well, and possibly higher rates.

So quite logically, a bank wants to ensure some equity if the housing market goes down. The lower the LVR, the more money it takes for you to feel comfortable repaying. 

Benefits of Keeping Your LVR calculator Low

If possible, a low LVR can save tens of thousands during the lifetime of the loan due to:

•  The avoidance of LMI
•  Facilitating easy approval to a home loan
•  Granting lower interest rates by lenders
•  Having multiple options of various lenders

Also, a much better position for negotiating even better terms. 

Ways to Lower LVR calculator

1. Saving: More for an investment upfront means you borrow less. 

2. Buy an affordable home: That’s how you keep the loan amount lower. 

3. Use existing Equity: If you refinance and use that as a deposit, you can keep your LVR down. 

4. Smart renovations. Renovating to create value after you buy the property can also build equity and lower your LVR with time. 

LVR, Lenders Mortgage Insurance

LVR Range	LVR Range	Risk Level
≤ 80%	No LMI	Low
81%–90%	Moderate LMI	Medium
91%–95%	High LMI	High
>95%	Very High or Declined	Very High

Once the LVR exceeds 80%, you may generally be required to pay some premiums on the lender’s mortgage insurance. It prote

Secure Your Financial Future

Sometimes it is called the Ultimate Thoughts on an LVR. Your LVR thus defines your home loan scenario. Today, if you know how to work out your numbers or even if you simply use an LVR calculator to do it, it is a positive thing: it certainly helps you compare in the mortgage or refinancing application.

A thorough knowledge and taking charge of your financial future.