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Maximum LVR’s And Loan Amounts

May 7th, 2011 30 Comments
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The loan to value ratio (LVR) influences the size of the loan that you are able to obtain from a lender, as well as they way that they view your risk. If you are interested in knowing what your LVR can be based on the size of the loan, this article will serve as a guide. Of course, it is important to realize that every lender is different, and that your own financial situation certainly has an influence on these figures as well. 

With an LVR of 95%, you are only offering the bank security against a 5% fluctuation in the price of the home. They consider this to be fairly high risk, and will almost certainly require that you pay for lender’s insurance. Generally, you could expect approval for a $650,000 loan. The two biggest mortgage insurers will be willing to consider loans as high as $750,000, but your credit and income situation will have to be very robust to receive approval. There are two other important lenders who will go as high as $1,000,000. Again, it take a strong application to receive approval. 

At 90%, you can expect to be able to apply for an $850,000 loan. Unlike a 95% mortgage, you will have better luck trying to apply for a refinance or debt consolidation loan. With only a 10% deposit, it still may be difficult to obtain these types of loans, but they are available to those with a strong application and a rational justification. Any type of “cash out” would usually be limited to less than $100,000. More lenders are willing to go as high as $1,000,000 on a loan at 90% than at 95%. 

At 85%, your options start to look quite a bit more varied. Depending on your income, it shouldn’t be difficult for you to receive a loan with a value of $1,000,000 from almost any lender. There may be some restrictions on the amount of equity that you can release for your own purposes. Some lenders will be able to offer this option without asking you to sign up for lender’s insurance. 

An 80% home loan should provide you with all of the options that most people would be interested in taking advantage of. Their is no lender’s insurance required by the vast majority of lenders, and there are few restrictions on the amount of equity that your can release. If you have the income to pay for one, a loan as large as $1,600,000 should be available to you. Even larger loans may be available with lender’s insurance. 

Finally, once you start looking at 70% loans, you reach a point where the size of the loan is unlimited, subject to your ability to pay for it. There are even fewer restrictions on refinancing. Some lenders might limit the size of the loan to $5,000,000, although this limitation will have almost no effect on nearly all borrowers. 

Lo Doc Loans 

The situation is somewhat different for what are known as “lo doc loans.” These loans are for people who would prefer not to disclose their financial information. In other words, they are not required to provide proof of income. This is ideal for people who are self-employed, or for people who simply don’t want to provide this information. Borrowers are still required, in most cases, to declare their income, and they still need to undergo a credit check. 

Under these circumstances, banks will still ask you to pay lender’s insurance if you apply for an 80% home loan. Despite this, you might be eligible for a loan as high as $1,000,000. Most lenders will only provide a loan to purchase a property. They may be willing to refinance or offer a home equity loan, but the restrictions are much tighter than in a standard 80% loan. While the lenders may limit loans to $1,000,000, both of the major insurers provide an exposure limit of $2,500,000 for each borrower. 

Self-employed workers who won’t or can’t provide proof of income are only exempt from lender’s insurance if they apply for a 60% loan. At this point, they have an unlimited capacity to borrow in most cases. At 60%, fees and rates are standard. 

Lenders other than banks may approach lo doc loans differently. It is possible for a borrower to receive a loan for $600,000 with an 85% LVR. That said, they should be prepared to pay a higher interest rate, about 4% higher than the standard bank rates. Risk fees and applications fees will also be charged. 

At 80%, the interest rates are slightly lower, about 3% higher than the bank rate. Again, risk and application fees are applicable, and loans are limited to about $750,000. At 70%, non bank lenders may offer loans as high as $1,500,000. Loans below $1,000,000 will charge interest rates about 2% higher than the banks. Smaller loans have a relatively low cost application process. 

By the time you have saved up a 50% deposit, you can expect to have no problem applying for a $3,000,000 loan from a non bank lender. Loans that are smaller than $750,000 will have an interest rate less than 1% higher than that of other banks. The larger the loan amount, the more the lender will prefer a relatively short term for the loan.

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