Debt Management and Leverage
Margin lending
Loan to valuation ratio
The Loan to Valuation Ratio (LVR) establishes the percentage of borrowings in relation to the total valuation of the investment.
So if we look at the example again, the LVRs are as follows:
LVR 1 = $75,000 / $100,000 = 75%
LVR 2 = $25,000 / $50,000 = 50%
When the LVR becomes too high, you may trigger a margin call.
The Loan to Valuation Ratio increases if the value of the investment drops, or your amount of borrowing increases.
Page 34 of 46