Definition
What is LVR (Loan-to-Value Ratio)?
The ratio of a loan to the value of the asset securing it, used to assess lending risk.
Loan-to-Value Ratio (LVR) is a key risk metric in property and private credit investing. It represents the size of a loan relative to the value of the asset used as security.
Calculation: LVR = Loan Amount / Property Value × 100%
LVR Risk Levels: - <60% LVR - Conservative, significant equity buffer - 60-70% LVR - Moderate risk, typical for first mortgage funds - 70-80% LVR - Higher risk, often mezzanine territory - >80% LVR - High risk, limited buffer for value declines
Why LVR Matters: - Lower LVR = more protection if borrower defaults - Property value can drop before lender faces losses - First mortgage funds typically target <70% LVR - Mezzanine lenders accept higher LVRs for higher returns
Important Considerations: - Valuation quality matters - independent valuations are preferred - "As-is" vs "As-complete" valuations for development - LVR can increase if property values fall - Portfolio average LVR may mask high individual loans
Related Terms
First Mortgage
A loan secured by first-ranking security over property, giving the lender priority claim in default.
Mezzanine Debt
Subordinated debt ranking behind senior debt but ahead of equity — higher returns (typically 10-15%) compensating for higher risk and weaker security.
Private Credit
Non-bank lending to businesses and property developers, offering regular income and typically secured positions.
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Educational Content Disclaimer
This glossary provides general educational information only and does not constitute financial, legal, or tax advice. Definitions and explanations are simplified for educational purposes and may not cover all aspects or nuances of each term.
Before making any investment decision, you should seek independent advice from appropriately qualified professionals. Wholesale Investor does not recommend or endorse any particular investment, strategy, or fund manager.