The Loan to Value Ratio (LVR) shows how much a property is being bought with debt (bank loan) compared to cash. Homebuyers should understanding this ratio as it determines how much interest and fees borrowers will pay. Click here to learn about interest.
Regarding home loans, interest is basically the cost of money charged to the borrower (homebuyer) in order to compensate the lender. An interest rate is applied to the loan amount which produces a dollar amount of interest that is charged to the borrower. As such, loan repayments made by the borrower will cover the interest charged during the period and a portion of the actual loan amount (principal).