Loan to Value Ratio—commonly referred to as LVR—is a key figure lenders use to assess how much they’re willing to lend you against the value of a property. It’s calculated by dividing your loan amount by the property’s value or purchase price, whichever is lower, and expressed as a percentage.
Example: If you’re borrowing $400,000 for a property valued at $500,000, your LVR is 80%.
LVR helps lenders determine the risk involved in approving your home loan. The higher your LVR, the more risk the lender assumes—especially if you default and they need to recover costs through a sale.
For self-employed borrowers, keeping LVR below 80% can help avoid LMI and improve overall affordability, especially when alternative income verification methods are used (such as bank statements).
If you’re planning to refinance, LVR will still be assessed based on a current independent property valuation. If the LVR exceeds 80% at the time of refinancing, you may need to pay LMI again—especially if changing lenders.
It’s important to note that property value is determined by a licensed valuer, not by your offer price or perceived market value. In some cases, a valuation may come in lower than the purchase price, which can affect your LVR and borrowing capacity. Discrepancies can be contested, but strong evidence is required.
At Self Employed Finance, we help you explore all available options—whether that means using alternative income documentation, increasing your deposit, or planning around the lender’s LVR requirements.
Contact us today for expert advice on structuring your home loan with confidence.