LVR — Loan-to-Value Ratio — is the loan amount divided by the value of the security property, expressed as a percentage. A $700,000 loan against a $1 million property is a 70% LVR.
Lenders cap LVRs by product and security type. Archer Wealth's standard caps are 70% on residential houses (75% on metro houses inside the warehouse trust eligibility), 65% on apartments and units, 60% on commercial property and 60% on land.
Why it matters: LVR is the simplest measure of how much room a lender has if a deal goes wrong. At 60% LVR, the property would need to fall 40% in value before the lender's principal is at risk; at 80% LVR, only a 20% fall does the same damage. Lower LVR = safer position for the lender, usually = sharper pricing for the borrower.
LVR is calculated gross of all amounts extended — including prepaid interest, capitalised interest, and fees. A loan that "looks" 65% LVR can sit at 70% once those are added in.