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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.

Stay tuned for more daily insights from Wealth Through Property.

~Daimien Patterson
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Legal Disclaimer: This information ('the information') is presented for illustrative and educational purposes only. It is not presented nor should it be treated as real estate advice, legal advice, investment advice, or tax advice. All investments involve risk and potential loss of money. If you require advice in any of these fields you should contact a suitably qualified professional to assist and advise you. Your personal individual financial circumstances must be taken into account before you make any investment decision. We urge you to do this in conjunction with a suitably qualified professional. Daimien Patterson, IntegrityX Enterprises Pty Ltd, and their associated trading names, companies, researchers, authorised distributors and licensees, employees and speakers do not guarantee your past, present or future investment results whether based on this information or otherwise. Daimien Patterson, IntegrityX Enterprises Pty Ltd and their associated trading names, companies, researchers, authorised distributors and licensees, employees and speakers disclaim all liability for your purchase decisions. You should do your own independent due diligence and seek the advice of qualified advisors before making any investment decision.