The practical answer
LVR compares total debt secured by a property with its assessed value. For example, $700,000 of debt against a $1 million property is 70% LVR. A proposed second mortgage must take the existing first mortgage into account. Lenders may use their own valuation and deduct fees or prepaid interest from the cash you receive.
What to check in practice
The basic calculation is total secured debt divided by the property value, multiplied by 100. For a $1 million property with a $500,000 first mortgage and a proposed $200,000 second mortgage, total secured debt is $700,000 and the combined LVR is 70%.
Available cash is not simply the difference between value and existing debt. Maximum LVR, valuation, legal costs, establishment fees and interest structure can all change the net amount. Ask for the net proceeds and total repayment amount together.
Before using property equity
Confirm the genuine business purpose, available property equity, the complete cost of finance and a credible repayment plan. Equity Tap assesses business facilities from $50,000 to $5 million, secured by acceptable Australian real estate, for terms of one to twelve months. Eligibility and timing depend on the full scenario.
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General information only, not legal, tax or financial advice.