Loan-to-Value (LTV) ratio refers to the percentage of the property’s value you stand to get as the loan amount from your lender. The LTV is important to the lender so they can evaluate how much they can sanction as a loan sum against your property value and ensure that your loan amount does not exceed your repayment capacity, or the price of the property.
The Reserve Bank of India has set guidelines for all lenders that dictates the loan amount disbursal policy. The current Home Loan LTV ratio stands at 75% to 90% of the property value, reinforcing that lenders can only fund up to 90% of the property value, and not more.
| Home Loan Sanction Amount | LTV Ratio |
|---|---|
| Up to Rs.30 Lakh | Cannot exceed 90% |
| Between Rs.30 Lakh to Rs.75 Lakh | Cannot exceed 80% |
| Above Rs.75 Lakh | Cannot exceed 75% |
Your LTV ratio and down payment are important things to consider when you are contemplating buying a new house. A sizeable down payment brings down your loan-to-value ratio, which boosts your chances of Home Loan approval.
The LTV ratio is calculated using this formula:
LTV Ratio = Loan principal amount/Property Value x 100
The formula suggests that if your desired property costs Rs.1 Crore* and the lender can extend an LTV of 75%, your loan amount may stand to be Rs.75 Lakhs.
As the LTV is a crucial checkpoint for mortgage loan lenders, it also becomes an important criterion for your loan eligibility. Read on to understand how one’s loan-to-value ratio can impact their loan amount and approval.
Your Home Loan eligibility is notably tied to your LTV ratio, as the amount you request is evaluated by the lender based on your LTV eligibility. Here are some points to keep in mind before applying for a Home Loan:
- Assess your loan amount request and ensure that the LTV ratio does not exceed the lender’s disbursal policy. Note that high LTV applicants may face a higher chance of rejection, as a high LTV means more risk for the lender.
- Consider making a sizeable down payment, so you borrow a smaller principal amount and bring down your total cost of borrowing.
- Apply for a joint Home Loan with co-applicants to enhance your Home Loan eligibility. If your income or repayment capacity falls short, or the value of the property is too high, a joint application can be the right step, as the lender can rely on all co-applicants for a stronger eligibility.
Potential borrowers can consider applying for a Home Loan with Bajaj Housing Finance for competitive interest rates and flexible repayment tenors. They can also benefit from a sizeable loan sanction and hassle-free application process, so there are no obstacles to their home buying venture.
*Terms and conditions apply
An LTV ratio is calculated by dividing the amount borrowed by the market value of the property, expressed as a percentage. For a 60% LTV ratio, the property should be appraised at Rs.1,00,00,000 and you may be allocated a loan of Rs.60,00,000. Which means you will have to arrange the remaining Rs.40,00,000 as cash.
LTV 80 means 80% ratio – which means the loan allocated would be 80% of the appraised property value.
For loans above Rs.30 Lakh up to Rs.75 Lakh, you will get an LTV ratio of not more than 80% of the property value
For loan amounts of Rs.30 Lakh or less, you get the highest LTV ratio of 90%.
