What Is the Maximum LVR for a Commercial Property Loan?
Commercial property loans commonly reach 60 to 70 per cent LVR, with up to 80 per cent available for selected borrowers and properties.
The maximum loan-to-value ratio, or LVR, for a commercial property loan depends on the property, borrower and lender.
For many standard commercial properties in Australia, lenders commonly operate between 60 and 70 per cent LVR. This means a buyer may need to contribute 30 to 40 per cent of the property value, plus transaction costs.
Can commercial loans reach 80 per cent LVR?
Yes, selected lenders advertise commercial property lending up to 80 per cent LVR. However, this is not available for every transaction.
Higher leverage is generally reserved for strong borrowers purchasing acceptable properties in established locations. The lender will consider serviceability, the tenant and lease, property condition, intended use and how easily the asset could be sold.
When is the maximum LVR lower?
A lender may reduce the maximum LVR for vacant property, specialised assets, short leases, weaker tenants or locations with limited resale demand. Hotels, childcare centres, service stations, development sites and properties designed for a narrow use can attract more conservative lending limits.
Owner-occupied premises may be assessed differently because the trading business, rather than rental income, supports the debt.
Remember the valuation
The lender usually calculates LVR against its accepted valuation, not simply the purchase price. If a property is purchased for $2 million but valued at $1.9 million, a 70 per cent LVR produces a maximum loan of $1.33 million.
Stamp duty, GST where applicable, legal expenses and lender fees must usually be funded separately.
The highest LVR is not always the best structure. More debt can preserve capital, but it also increases repayments and refinancing risk. Flexdoc compares lenders and structures commercial property finance around the asset, borrower and long-term strategy.
Speak with Flexdoc about your commercial property loan options.
This article provides general information only and does not constitute financial, legal or taxation advice.