Whenever you consider Private Home Loans, the LVR (Loan to Value ratio) is one of the most important things for a borrower to understand.
It is equally important for lenders to make the most out of the LVR cap, it determines the amount they can lend at a time, and will help calculate the risks of lending and the best rate to aim for, especially when dealing with private home loans.
Calculating LVR for Private Home Loans
The LVR itself is simply the amount borrowed by the borrower (the loan), compared to the value of their property (the value), expressed as a percentage.
Calculating this percentage is simple – take your loan amount, divide it by the value that their property is appraised at, and then multiply it by a hundred.
Say the borrower has signed a contract against a $500,000 purchase price property. Accounting for all other costs, they have $100,000 saved for the deposit, and are planning on borrowing $400,000. Because 400,000 divided by 500,000 and multiplied by 100 is 80, the LVR is 80%.
With that settled, we can now get into why 80 is the magic number if you’re looking for the best percentage for a private home loan.
Why 80% LVR is the best option when getting Private Home Loans in Sydney, Melbourne or Australia.
Going above an 80% LVR means taking on more risk, and going below that means losing out on potential profit. With a 20% buffer, you have some wiggle room in case the deal goes wrong, and should be ready for any fluctuations in the market.
For both lender and borrower, this represents the perfect balance between the highest amount you can lend and the maximum risk you should be willing to accept on a private home loan. Because the risk does not yet reach unacceptable levels, 80% achieves a perfect balance on the tightrope, allowing you to maximise on the home loan while posing little risk to your own finances.
To be safe, it is important to leave a bit of room in your calculations, just in case the valuation of the property comes back lower than expected. As the LVR of the loan is dependent on this, a lower valuation means your loan amount will be lessened.
Choose Gryphon Financial for your clients.
If an 80% LVR home loan is what you’re looking for, that’s exactly what we offer here at Gryphon Financial. We specialise in arranging private home loans that go up to 80% LVR over a 30 year team, which can be difficult to find private lending.
Whether your client has lo-doc, bad credit, or anything else, don’t worry – just contact us and we’ll help you set things right, even where the banks say no.
Need Non-Bank Private Home Loans with high LVR? Speak to us today.
Private Home loans of any sort are large financial undertakings, and as with anything finance-related, it’s best to come prepared with some research. It is important to compare options and carefully assess the costs and conditions. Clients who understand this are sure to appreciate an 80% LVR, as it should benefit them in similar ways.
We offer speedy settlements with a simple application and approval process, and will work with what would otherwise be insufficient documentation and even bad credit. Gryphon Financial will compare from over 200 private lenders with funds readily available for lending to secure a competitive deal for any client.
All agreements are legal contracts regulated by the courts. Just send us your scenario and our well-trained lending managers will assist you from start to finish.
With over 20 years of experience in lo doc and bad credit private home loans, at Gryphon Financial, We Turn No into Yes.