LVR
How LVR works for commercial property
Loan-to-value ratio drives what you can borrow, at what price, more than any other single number. Here's how it's calculated for commercial property, and where combined LVR changes the picture.
Loan-to-value ratio (LVR) is the loan amount expressed as a percentage of the security property's value. It's the single figure a private lender leans on most heavily, because a facility secured by property is assessed on that security first - the lower the LVR, the more equity buffer sits between the loan and the lender if the property ever needs to be sold.
The calculation
LVR = loan amount ÷ security value × 100. A $600,000 loan against a $1,000,000 property is a 60% LVR. Where a loan is secured against more than one property, use the combined value of everything offered as security against the total loan amount to get an accurate figure.
Combined LVR, and why it's different
Where a second mortgage sits behind an existing first mortgage, combined LVR - both loans together, measured against the property's value - is what actually gets underwritten. A second mortgage taking combined exposure to 50% is a materially different proposition to one reaching 70%, and pricing reflects that gap directly.
- Single mortgage: loan amount ÷ property value
- Combined (second mortgage) LVR: (existing first mortgage balance + new loan) ÷ property value
- A higher LVR generally means a higher rate, since there's less equity buffer to absorb a shortfall
- Commercial and specialised security often attracts a lower maximum LVR than standard residential security
LVR isn't just a borrowing limit. It's the main lever a lender has for pricing risk on a deal it hasn't seen before.
What moves the maximum
Alphacon's sweet spot sits up to 75% LVR on a first mortgage across Alphacon Bridge, Fast and Line. Alphacon Reach is a first mortgage too, capped at 70% to reflect a wider risk appetite on complex or regional security. Alphacon Second is the one that sits behind an existing facility, up to 70% combined LVR. The exact maximum for any given deal still depends on the security type, its location, and the deal itself - a straightforward metro property and a complex regional asset don't sit on the same curve even at the same LVR.
Get the LVR right before you talk to a lender and the rest of the conversation - rate, term, structure - moves much faster, because it's the number that determines what's actually possible before anything else is discussed.
Check your LVR in under a minute
Work out your loan-to-value ratio, including combined LVR across a first and second mortgage, and see how it compares to Alphacon's lending thresholds.
Open the LVR calculatorGeneral information only
This article is general in nature and does not take your circumstances into account. It is not financial or credit advice. Alphacon Capital writes business-purpose loans secured by property.
