Glossary
Loan-to-value ratio (LVR)
Also called: LVR, loan to value
The loan-to-value ratio compares the amount borrowed with the value of the property securing it, expressed as a percentage. Lenders use it to measure how much of the property's value is already committed to debt and how much buffer remains if the property has to be sold to repay the loan.
An example
A borrower asks for a loan against a property a valuer has assessed. The lender divides the loan amount by the valuation and multiplies by one hundred. If an existing mortgage also sits on the title, the lender usually looks at the combined figure as well.
Why it matters
LVR is one of the first numbers a lender looks at, because it shapes how much risk the lender takes on. The value used is the lender's own valuation, which may differ from a purchase price or an agent's appraisal, so the ratio you calculate yourself is only an estimate until the valuation is done.
Try it: LVR and loan-to-cost calculator