What is Your Loan to Value Ratio?
Loan to Value Ratio is one of those things you’ll hear about a lot in the world of loans. It’s important because it may affect your borrowing power. So, what is LVR?
Loan to Value Ratio (LVR) is how lenders describe the amount you need to borrow to purchase a property, or in this case, a rent roll. In a nutshell: it’s the amount you need to borrow, calculated as a percentage of the ‘lender-assessed value’.
The ‘lender-assessed value’ is basically your lender’s valuation of the purchase.
Generally, the lower the LVR, the better
Why is a low LVR considered better? From the lender’s perspective, a lower LVR generally carries less risk.
A lower LVR may also be good news because you’ll be off to a head start when it comes to purchasing a rent roll. If your LVR is lower, you will have more equity, right from the start.
When it comes to LVR, 60% is generally considered the tipping point for purchasing a rent roll. Banks will consider going up to 70% for very strong deals, on the condition that the LVR is reduced by 60% within 3 years.
With recent changes in the financial industry and market shifts, the historic Rent Roll funders are sometimes not as competitive or your best option.
And that’s why speaking with an experienced Rent Roll finance broker will help take all the hard work out of finding you the best lender.
Josh McKay, Director at JCM Finance, discusses what banks are looking for and how utilising an experienced finance broker can help you obtain the best LVR for your purchase, whilst avoiding the time consuming process of dealing with the bank directly.
To arrange a free and confidential consultation with Josh to discuss your financial options, click the button below.
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