Understanding property finance 👉1 Calculating a Loan-to-Value Ratio
As a property investor, you need to understand how to calculate Loan-to-Value Ratios (LVR). An LVR is the ratio or percentage of a loan relative to the value of a property.
You will need this information for the strategies that we’ll discuss later on in this email series where you need to know your maximum LVR for any given property purchase. If you know how much equity you have in a property and the maximum LVR, you will know whether or not you can purchase your next property.
For example, we have a property worth $500,000 with a loan of $450,000. To calculate the LVR, we simply work out what percentage the loan is of the total value of the property.
The formula is: Loan / Value x 100 = LVR%
$450,000 / $500,000 x 100 = 90%
Calculating the LVR of a property
Thus, the LVR for this property is 90%.
Join me next for my second property finance insight.
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