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13 March 2015There has been so much talk in the news about LVR (Loan to Vale Ratio) restrictions but exactly what is an LVR and how is it calculated and more importantly how does it effect what we can do.
LVR is the percentage of the loan compared to the value of the property. If you have a house worth $100,000 and the loan is $80,000 your LVR would be 80%. If you are looking to purchase a new property and you were advised you needed a 20% deposit this is 20% of the purchase price ie $20,000.
If you are building the LVR is determined by the purchase price or the registered valuation of the land PLUS the cost for the building eg you own a section worth $200,000 and the building costs are $300,000. The Lender would then consider the Value of the “project” to be $500,000. If you were advised you needed a 20% deposit you would be required to have $100,000. Often the valuation at the end of the project is more than the value of the land plus the building costs but the Lender will work off the lower figure.
Common misconceptions made by clients in regards to LVRs are as follows:
At this time we can have no assumptions on LVR restrictions. You need to identify what options are available specifically to you and your situation as you may well have more choices than you think.
Published In Whakatane Beacon
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