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Decoding the Jargon - LVR

You may or may not have heard the term LVR. If you have applied for a loan in recent years, chances are you probably have.

LVR stands for Loan to Value Ratio. But what does it mean?? And why does it matter??

Loan to Value Ratio is the financial term used by Lenders to express the ratio of a loan to the value of the asset purchased. Lenders will use the LVR to figure out how much risk is involved in a loan. Therefore it is a key element that a bank takes into consideration when assessing your loan application.

For example, if you want to purchase a house worth $500,000 and you need to borrow $450,000 then the LVR for the loan would be 90%.

The higher the LVR, the riskier the loan is for the lender. They need to assess their ability to sell the property and recoup the loan funds should you default on the loan. So the lower the Loan Amount is to the Property Value the less of a risk the loan would be.

Contact a Gadsden Finance Broker for an Obligation Free chat if you have any questions regarding this or other finance concerns. PH: 03 5443 9098

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