Understanding LVR (Loan-to-Value Ratio)

LVR stands for Loan-to-Value Ratio. It is a percentage that shows the size of your loan compared to the value of your property. Banks use this to assess how "risky" a loan is.

Key Concepts

• The 80% Threshold: If you borrow more than 80% of a property's value, you usually have to pay Lenders Mortgage Insurance (LMI).
• Risk Assessment: A lower LVR (e.g., 60%) means you have more equity and are a lower risk to the bank.

How it works in PropKeeper

PropKeeper automatically calculates your LVR for every property in your portfolio:

$$LVR = \left( \frac{\text{Total Loan Amount}}{\text{Property Value}} \right) \times 100$$

Why LVR Matters

1. Refinancing: A lower LVR often unlocks better interest rates.
2. Accessing Equity: To pull equity out, banks generally want your post-loan LVR to stay below 80%.
3. Avoiding LMI: Tracking your LVR helps you see how close you are to removing the need for mortgage insurance on future purchases.

Pro Tip

The fastest way to lower your LVR is through offset accounts or extra repayments. PropKeeper allows you to track these so you can see your "Effective LVR"—the ratio based on what you actually owe after considering cash offsets.