Lenders loan limits - what is LVR?
Lenders use a term called LVR – loan to value ratio – which represents your loan as a percentage of the security property value.
We’re usually familiar with the rule that a 20% deposit (or an 80% loan) is preferred – there’s a nice buffer in there for the bank should anything go wrong – and – in most cases under 80% we don’t have to ‘mortgage insure’ the loans.
Remember mortgage insurance is a policy that is taken out by the lender to protect THEM if you are unable to make your repayments, even though you pay for the insurance.
Most lenders will still lend you up to 90 – 95% of the value of most securities (with a hefty mortgage insurance premium).
But there are instances when they won’t, for example if the property is a little unusual, or overly large, or in a location where property doesn’t sell as quickly. The driver behind all of it is “prudent lending”, ie a property which both you or they could sell very quickly if it ever becomes an issue.