Calculating the loan-to-value ratio (LVR) is important in the lending process. Beginners may find this concept overwhelming, but it is manageable with some understanding.
What is LVR?
LVR shows the percentage of money borrowed compared to the property’s value. For instance, if a property is valued at $500,000 and $475,000 is borrowed, the LVR is 95%. Knowing a borrower’s LVR is essential because it affects interest rates and fees linked to the loan. Calculating LVR accurately helps borrowers understand their financial situation better.
Before applying for a loan, clients should assess their borrowing capacity. This indicates how much they can borrow based on income, expenses, and credit history. A borrowing capacity calculator helps clients estimate their potential loan amount. By entering their financial details, clients can understand their borrowing limit better.
Mortgage Street offers various products to meet different needs. The Premium product allows a maximum LVR of 95%, including Lenders Mortgage Insurance (LMI). This option lets customers borrow up to 95% of the property value. It is especially helpful for first-time buyers with limited deposits.
However, borrowers should be aware that a higher LVR means more risk for lenders. Therefore, those with higher LVRs might face increased interest rates and fees. By understanding their LVR and working with a mortgage broker, borrowers can find suitable loan options.
In summary, understanding LVR and borrowing capacity is crucial in the lending process. Borrowers should know their LVR and its impact on interest rates and fees. This knowledge empowers them during borrowing. Calculating LVR is a key step for potential buyers. Mortgage Street’s Premium product allows for a maximum LVR of 95%, making it ideal for new buyers. Borrowers seeking help with their LVR or loan options should contact a Mortgage Street accredited mortgage broker.