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LVR, LMI, AAPR? Home loan help: Decoding acronyms

In the world of home loans, it’s easy to get confused with all the jargon thrown about. Here are some of the property world's most common acronyms decoded.

What is LVR?

It’s 3 letters and yet this could be the most important aspect of saving for your home loan. LVR is the Loan to Valuation Ratio, which is shown as a percentage of the amount of your loan against the valuation of your property. In other words, it rates the size of your deposit (or equity if you already own a home) against how much you are borrowing. The lower the LVR the better!

For example, if you were to take out a $500,000 for a property worth $600,000, your LVR would be 500,000 divided by 600,000 which would convert to 83%. Any home loan with an LVR over 80% is considered high risk by lenders which could mean extra fees for you.

Read our guide to LVR here.

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What is LMI?

Lenders Mortgage Insurance (LMI) is a fee charged by home loan lenders. It is typically required by a lender if the borrower is borrowing more than 80% of the property purchase price. It protects the lender in the event that the borrower defaults and is unable to meet their loan repayment obligations.

LMI can be paid in full at settlement, however most lenders will add it to the total loan amount so it can be paid off on top of the borrower’s monthly loan repayment. LMI is calculated as a percentage of the amount borrowed. The fee the borrower pays increases as the LVR and loan amount increases. This fee varies slightly from lender to lender and depends on a number of variables.

Read our guide to LMI here.

What is AAPR?

The Average Annual Percentage Rate is another way of calculating the real rate of your home loan. This is done by taking your loan amount and, taking into consideration additional fees such as honeymoon fees and introductory offers, finds the rate over a 7 year period. It is often considered the ‘true’ or ‘real’ rate you will end up paying on your home loan.

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Tags: lmi (lenders mortgage insurance), aapr, loan to valuation ratio, new purchase

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Important legal stuff

COMPARISON RATE WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years.
Lendi is the trading name of Lendi Pty Ltd, a related body corporate of your licensed credit assistance provider, Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence Number 442372). We will never sell your email address to any third party or send you nasty spam, promise.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of major and non-bank lenders including Click Loans which is a wholly owned subsidiary of Auscred Pty Ltd and a related body corporate of Auscred Services, your credit assistance provider. Although Lendi compares over 1600 products from over 30 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
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