The Loan-to-Value Ratio (LVR) is one of the most common ways that lenders figure out how risky a loan is. It’s a quick way for lenders to see how much risk they are taking by comparing the total loan amount to the value of the property being used as security.
But that’s not the case when it comes to second debts.
Different people have very different risk profiles, and using the traditional LVR may only give you a part of the story. Because at Knote we use SLVR (Structured Loan to Value Ratio), which is a more organised and sound way.
What is SLVR (Structured Loan to Value Ratio)?
To deal with these problems, Knote created the Structured Loan to Value Ratio (SLVR), an internal risk assessment tool made just for second mortgages and gap funding.
SLVR goes beyond a simple ratio. It incorporates real-world recovery considerations to provide a more accurate and disciplined assessment of lending exposure.
Why Traditional LVR Isn’t Enough for Second Mortgages
In a first mortgage scenario, the lender has priority claim over the property.
In a second mortgage:
- The first lender is repaid first
- Recovery timelines are longer
- Risk exposure is higher
This means a standard LVR calculation does not adequately reflect the true risk position.
How SLVR is generally Calculated
For example Only and in most cases : “Subject to First Mortgagee Priority “
To ensure prudent lending and protect all stakeholders, the second Mortgagee applies a structured buffer to the first mortgage when calculating total exposure.
SLVR Methodology
Scenario | Buffer Applied to First Mortgage |
First Mortgage held by Bank / ADI / Private lender | +$% Add buffer to First Mortgage as per priority |
Note: Terms and Conditions Apply
Why This Matters
SLVR brings clarity and confidence to every lending decision by ensuring:
- Realistic risk assessment — decisions are based on actual recovery scenarios, not just theoretical values
- Smarter loan structuring — risk is carefully priced and aligned with the deal
- Responsible borrowing — helps prevent borrowers from becoming over-leveraged
- Sustainable capital use — supports long-term stability for both lenders and borrowers
In short, SLVR helps create a more balanced, transparent, and reliable lending process for everyone involved.
A More Disciplined Approach to Second Mortgage Lending
At Knote, we don’t just focus on providing funding, we focus on structuring it the right way.
SLVR shows how committed we are to:
- Complete credit check
- How to lend money responsibly
- Capital sustainability over the long term
- executing all deals in the same way
We use SLVR to make sure that every second mortgage loan is looked at with a clear and balanced view of risk.
Final Thoughts
Second mortgage lending isn’t as straightforward as traditional lending. When multiple lenders are involved, the risk becomes more layered, and simple metrics like LVR don’t always tell the full story.
That’s why at Knote, we use SLVR (Structured Loan to Value Ratio) — to bring more clarity and realism into how we assess each deal. It allows us to move quickly when our clients need funding, while still maintaining a strong, disciplined approach to risk.
In the end, it’s about making smarter lending decisions that work for both borrowers and long-term capital sustainability.
Need Fast, Structured Second Mortgage Funding?
FAQ's
What is the difference between LVR and SLVR?
LVR compares the total loans with the property value, and SLVR uses buffers to adjust the first mortgage to represent risk in the second mortgage lending.
Why does Knote apply a buffer to the first mortgage?
The buffer takes into consideration the expenses of enforcement, delays, and risk exposure, which makes the total loan exposure assessment more accurate.
Does SLVR affect loan approval?
SLVR is part of the process for assessing internal risks, but full credit evaluation, security review, and lending criteria must be met before it can be approved.
