When considering a loan application the Loan to Value Ratio (LVR) needs to be determined. The LVR is also known as a LSR or Loan Security Ratio. It means the same thing, however is basically a figure expressed as a percentage or how much the borrowed amount is in relation to the value of the security property.

LVR =	LOAN AMOUNT
	VALUE OF PROPERTY

The Value of the Property is determined as the purchase price or value as determined by an independent valuer appointed by the Lender - whichever is the lesser.

The LVR needs to be calculated for all loans to determine:

• Whether the Lender can lend the amount required.
• Where required, the Mortgage Insurance premium.

Some Lenders will lend up to 95% of the value of a property if it is to be used for owner/occupied purposes. Those who do not lend up to 95% will lend a maximum of 90%. Lenders will generally lend a maximum of 90% on investment property.

These maximum amounts may be reduced depending on the quality of the property and the applicant. The maximum amount that can be lent to a foreign investor, in most instances, is 70%.

When the loan amount exceeds $500,000, mortgage insurance is generally unattainable and a 20% deposit therefore will more than likely be required. Individual circumstances may be considered, however, and cover may be possible for a particularly strong applicant. A reduction in the maximum amount that can be financed usually coincides with an increase in the potential risk to the Lender.