I was wondering whether people generally look at the effective/net LVR or always quote the gross LVR. For example: Fred $1m property $800k loan $0 offset 80% LVR Jane $1m property $800K loan $800 offset XX% LVR a/ 80% b/ 0% ?
a) from a lending point of view But the loan could be paid off at any stage - it may also not be paid off at any stage!
I find people often quote it as b) but lenders view it as a). We've adjusted our fact find to account for people quoting it as b).
It's a). The LVR is still 80%. The fact that you have the funds in an offset is irrelevant. From a personal balance sheet perspective, it's b). Because you have an asset in cash sitting on one side and a liability sitting on the other which with net difference of nil.
Yep - my experience too. The Fact Find session may reveal that a property has a reasonably low LVR. Then when it comes to looking over mortgage statements you see that the loan limit is higher than the client had mentioned and/or thought. Cheers Jamie
On a similar note, Any benfefit in calculating LVR's based on the original price of the property and not the current value? For example: Property original price: 500k (Property current estimated value 700K) Current Loan value: 300K (paid off 200k) LVR based on original value: 60% LVR based on original value: 42.86% Cheers
It's a good idea. Similr theory used by buffet and a lot of value investors with their share portfolios.
@dabbler , that's very true from a serviceability point of view but it feels like using the original value gives me a better/more realistic view(maybe a more conservative view) of how i'm doing with that debt that i borrowed.
