Taking a new loan, especially a mortgage, is an extremely big decision. It’s important to check the details of the different products and offers you receive, and how it can affect your finances and repayments.
To help you through this journey, we have organised a series of blog posts explaining what all the often confusing terminology means. We hope this makes things a little bit easier.
What is a security?
Security is an asset, most commonly the property you are purchasing, that the bank or lender will hold against your mortgage repayment. It means that the financial institution reserves the title document until the loan has been paid off.
What does LVR mean?
When you are working out what amount you can borrow to purchase a property, the size of deposit you need to save and whether you are eligible for a particular mortgage product, the loan-to-valuation ratio (LVR) is one of the most important considerations.
In the simplest terms, the LVR is the percentage of the property’s value, as assessed by the lender, that your loan equates to. So, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 to pay for it, the loan is 80 per cent of the property value, making your LVR 80 per cent.
LVR is important because different lenders and loan types have different maximum LVRs and some lenders will only lend up to a certain LVR for small properties or properties in certain areas.
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