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LVR is a finance industry abbreviation for Loan to Value Ratio and it is calculated by dividing the value of the property by the loan amount. The value of the property is determined by the lenders valuation process which is usually the lesser of the purchase price or valuation conducted by the lenders valuer.
The ratio is used by the finance industry in determining risk and generally lenders have lending policy limitations in place based on LVR in order to give them a buffer to protect the debt in case legal recovery of the debt is required.
In a big picture sense overall average LVR’s are assessed as part of the determination of a lenders own credit rating. In order to lend above lending policy LVR’s lenders often insure their risk with a Lenders Mortgage Insurance Policy. In order to determine you may be able to borrow against the value of your property.
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