First Mortgage LVR Explained: How Much Can You Actually Borrow?

Loan to value ratio, or LVR, is the first number a private lender looks at. It is simply the loan amount divided by the value of the security property, expressed as a percentage. Borrow $1.5m against a property worth $2m and the LVR is 75 per cent.

At Malouf Capital, first mortgages run to 75 per cent LVR, from $1m to $20m, from 8.75 per cent per annum. That headline is the starting point, not the whole story — how a deal is structured decides whether you reach the ceiling or land well below it.

Why LVR matters more than your credit file

Bank credit teams assess you: your payslips, your scorecard, your servicing buffers. A private lender assesses the asset and the exit. If the property is saleable and the repayment plan is credible, the loan works. That is why self-employed borrowers, trust and company structures, and borrowers with a short trading history can often get a first mortgage approved when a bank cannot.

The trade-off is that the security has to do the heavy lifting. The lower the LVR, the more room the lender has if the market moves or the exit takes longer than planned — and the more flexible the terms tend to be.

What value do we actually use?

Not the price you paid, and not the number a selling agent put in front of you. LVR is calculated on an independent valuation. Three points to keep in mind:

• Purchases are usually assessed on the lower of the contract price and the valuation.
• Refinances are assessed on current market value, which can be a pleasant surprise if you have held the asset for several years or completed works.
• Development or unusual assets may be assessed on an "as is" basis, ignoring value that only appears once approvals or construction are complete.

What pushes the available LVR down

Two properties with identical valuations do not always support the same loan. Expect a more conservative LVR where the security is specialised or hard to re-sell (a single-purpose commercial building, for example), where the property is remote or in a thin market, where the land is affected by zoning or contamination issues, or where the exit relies on a sale in a slow segment.

Costs sit inside the LVR too

This is where borrowers most often get caught. Establishment fees, legal costs, valuation fees and — on many short-term facilities — capitalised interest are typically funded within the loan. If you need $1.4m in the hand on a $2m property, the drawn balance at the end of term may be closer to $1.5m. Work backwards from the funds you actually need, not from the maximum LVR.

How to present a deal at the top of the range

• Name the exit clearly. Refinance to a bank, sale of another asset, or completion of a contract — with a date.
• Offer a second property. Cross-securing two assets can lift total funding without lifting the LVR on either one.
• Bring the paperwork early. Rates notice, title search, existing loan statements, leases if the property is tenanted.
• Be upfront about problems. A caveat, an ATO debt or an overdue payment is workable when disclosed and priced. Discovered late, it stops a settlement.

A worked example

A Sydney investor holds an unencumbered property valued at $4m and needs $2.6m to settle a commercial purchase in twelve days. That is a 65 per cent LVR — comfortably inside the range. The exit is a bank refinance once two years of financials are lodged. The facility is written for twelve months, interest capitalised, no early repayment charge, so the borrower can refinance the moment the bank is ready.

If you know your value, your loan amount and your exit, you know your deal. Send us the scenario and we will come back with an indicative rate, LVR and timeline.