Before plunging into the numbers and how much of a deposit you need to buy a piece of real estate, let’s start with the LVR part.
LVR translates to ‘loan-to-value ratio’, which means how much money you can borrow versus the value of the property being purchased. For example, if a property was worth $400,000, you had a 20% deposit of $80,000 and you were borrowing $320,000 from a lender, then your loan-to-value ratio would be 80 per cent. This is because you were borrowing 80 per cent of that property's value.
This is a very important equation and will determine how much money you can borrow to buy a property, and whether or not you can purchase the property you want.
When you’re researching home loan products, most mortgages will list the LVR. This does vary from lender to lender, and loan to loan. The percentage of LVR will determine how much you need for a deposit.
In the case of a 90 per cent LVR home loan, the loan amount (what you borrow) is calculated as 90 per cent of the property’s value.
If you’re allowed to borrow up to 90 per cent of the sale price, you would need a deposit of at least 10 per cent of the property’s value to secure this type of loan.