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Calculation and Guidelines for the Loan-to-Value (LTV) Ratio

A loan against property (LAP) is a secured advance availed of against collaterals such as residential or commercial properties. The credits come with no end-use restrictions and can be utilised for any purposes, including financing education, business expansion, paying medical bills, and more. A loan against property is one of the most suitable financial solutions for high-value financing. An LTV for loan against property denotes the maximum amount that can be availed of as a loan against a property’s market value.

What is LTV for Loan Against Property?

When applying for a loan against property, it is necessary to know about the Loan to Value (LTV) ratio.

LTV is based on the valuation of a given property and denotes the amount of funds that can be availed against it. Bajaj Housing Finance offers high loan value and competitive interest rates for loans against property. Individuals must be aware of the LTV for loan against property as a deciding factor before applying.

The loan to value depends on the current market value of the property. Our LTV for loan against property can be as high as 75% to 80% of the property’s value based on several factors. These are:

  • Location of a property
  • Its age
  • The borrower’s age
  • The borrower’s credit score
  • Any existing liability

What is Loan to Value Ratio?

Loan to Value ratio is defined as the ratio between the current market value of a property to be mortgaged versus the loan amount sanctioned against it. This value is one of the essential criteria that helps evaluate the risk factor of sanctioning a property loan.

For example, if the loan amount sanctioned is Rs.40 lakh and the property is valued at Rs.80 lakh, the LTV ratio will be 50%.

The lower the ratio, the higher is the applicant’s chances to avail of attractive benefits and lower interest rates. On the other hand, a higher LTV ratio results in a higher risk for the lender. This results in a higher interest rate, making loans with a high LTV ratio costlier.

Mortgage loan value also depends on the property value and is generally higher for residential properties than for commercial ones. Moreover, the LTV also depends on occupancy status, with occupied properties fetching higher loan value compared to rented or vacant properties.

There are other factors that are considered before deciding on the LTV for a loan against property. These include an applicant’s age, credit score and current financial obligations. Having more working years generally results in a higher loan amount and a lengthy tenor.

Similarly, a high credit score reflects better credit management skills and makes you a less risky borrower. A low debt-to-income ratio of less than 50% also makes it easier to avail of a loan with a high Loan to Value.

Potential borrowers need to meet certain eligibility criteria to avail of high-value financing from Bajaj Housing Finance. These are:

  • Applicants must be Indian citizens.
  • They need to have a regular source of income to apply for property loans. They can either be salaried with an MNC, public or private concern or a self-employed individual with a stable income.
  • The age group for a salaried applicant is 23 to 62 years and 28 to 70 years for the self-employed.

Apart from fulfilling all these eligibility criteria, keep the following documents handy to ensure fast loan application:

  • Identity proof such as Voter ID card, Aadhaar card, PAN card, Passport or any other government ID.
  • Original documents of property to be mortgaged.
  • Address proof, including utility bill, ration card, Voter ID card, passport, Aadhaar card or any other government-issued address proof.

Salaried applicants will also need the following documents:

  • Latest salary slip
  • Income Tax returns
  • Bank account statement showing transactions for the last 3 months

Self-employed applicants must provide their last 6 months’ bank account statement as income proof.

On complying with the above requirements, availing a high LTV for a loan against property can become significantly easier. Apply for a loan against property and fulfil any number of financial requirements without any hassle.