T he term LVR is an acronym for "Loan to Value Ratio" and is a calculation used in a lot of different forms of lending. Lending money to people for home loans will use the results of this calculations to work out how risky they think that the loan to give you is going to be. Every lender that offers a secured loan will have different restrictions on how much that they will lend you. Even though you might be able to easily afford your repayments, or be a high income earner, this doesn't mean that you can borrow as much as you want to. Calculating your LVR is simple and easy to do. What's the difference in LVR between purchasing and refinancing? There's no difference in the overall calculations of the LVR when comparing between different loan purposes. What does change is how the value of the property is determined. Purchasing a property When you are purchasing a property, the value that is used in the calculations is worked out by one of two methods. The purchase price OR the value of the property that a certified valuer provides. It's important to note that a lot of lenders (but not all) will use the LOWER of these two values. It's simply how they assess risk. Get a customised purchase scenario report using our free calculator here. Refinancing a loan When you are looking to refinance your home loan, the purchase price isn't looked at in the transaction. You might have bought the property a long time ago and values change over time. If you've done any renovations or additions to the home then it's value may have changed. This means that the purchase price isn't a good indication of how much a home is worth. How does a lender assess the value of your home? They use a certified property valuer to provide them with a independent valuation. What's the maximum LVR that I can have? A good general rule to start with is to aim for an LVR of 80%. Most lenders will consider this a lower risk loan and provides you with lots of options when it comes to choosing a lender. In some cases you might be able to go higher than this but it will depend on your circumstances. Loan that have an LVR of 90% or even 95% are available, but they might be more costly for you. What about 100% LVR? Can I do this? On your own, you won't be able to do this. If you are looking to purchase a property, then your options on a 100% home loan are pretty limited. There are some "no-deposit" home loans out there though they will also require you to have a guarantor. The better option is to see if you can have someone guarantee your home loan. If the guarantor is able to put a portion of their property as security as well, then the effective LVR comes down into acceptable risk limits for the lender. Are my loan options restricted by my LVR? They can be. Each lender has different limits on the LVR for different products and for different loan purposes. For example, you will be able to have a higher LVR if the loan is for an owner occupied purpose (ie Home you're living in) and for an investment purpose (a home you rent out). This difference can be quite significant, so it's always important to check the options on your products before you choose your loan. How is my property valued? This question is pretty important one that we cover in a topic dedicated to it! Read more about property valuations here

Guides Archives • Well Home Loans

Q: How do I work out my LVR?

How can I calculate what my LVR is? It's actually very straighforward to work out the LVR of your home loan. It is simply the amount borrowed divided by the value of the property being used as security for the loan and then it's expressed as a percentage (we always multiply by 100). Let's look at a quick example below and then we'll explain the difference in the calculations for purchasing and refinancing. If we wanted to borrow say $450,000 and the value of the property that we are using is worth $500,000 then our LVR is: $450,000 ÷ $500,000 = .9 (and then we multiply by 100 to get a %). So our LVR is 90%. Learn more about what an LVR is right here

Q: What is mortgage protection insurance and do I need it?

Whether or not you've got a home loan or looking to purchase your first home, you've probably heard about insurance. More specifically, mortgage protection insurance. Knowing what this insurance covers is so important as this is the one that protects you and not your lender! Wait a minute? Insurance that covers ME with my home loan? This is an insurance policy that is aimed at protecting you if you experience unemployment, illness, injury, or death. The policy will assist with the continuation of mortgage payments. It is an optional insurance that you can choose to purchase or not. Why is it called Mortgage Protection Insurance? Well, it's pretty self explanatory really. This type of insurance helps to protect your family from unexpected circumstances that can cause your payments on your home loan to fall short.

Q: What is a caveat, lien or an encumbrance?

Property purchasers should be concerned about existing encumbrances, liens or any such restrictions over the property that may prevent them from establishing clear title upon purchasing the property. An encumbrance is a claim against the property, e.g. an outstanding mortgage over the property, or an easement which means that others have a right to use the property. A lien occurs when a party has a right to take possession of or sell the property belonging to another person as security or payment for a debt that person owes (e.g. government taxes). A caveat may exist if a notice has been given by a party declaring they have an interest in the property. The property should not be purchased until the caveat has been removed from the title. The borrower and/or the lender can purchase title insurance which protects them against loss if problems with title or other issues such as illegal structures on the property arise subsequent to purchase How can I find out if my property is affected by a caveat, lien or encumberance? You may obtain this information by requesting a Title Search of a property with the relevant State Department or engage a solicitor or property conveyancing agent who can perform this request for you.

Q: What do I need to apply for a home loan?

Lenders provide mortgage loans to a variety of entities including individuals, certain companies and trusts with each needing to supply different or additional information. Please refer to the DOCUMENT CHECKLIST to view the requirements that apply to your particular circumstances.