Loan-to-Value Ratio Explained: How Much Can You Really Borrow

For most aspiring homeowners, a loan can be the bridge between saving and buying. But one question can come up—how much of the property’s cost can really be financed? As per the guidelines, one can only borrow a certain percentage of the Home Loan amount. The central bank sets clear limits through what is known as the Loan-to-Value (LTV) ratio. Understanding these rules can help you plan better and avoid surprises when arranging funds. 

What is the Loan-to-Value Ratio?

The LTV ratio is the percentage of a property’s value that a lender is permitted to finance. For example, if the LTV cap is 80% and your property costs Rs.50 Lakh, the maximum loan you can get is Rs.40 Lakh. The rest has to come from your own contribution—commonly called the down payment. 

Think of LTV as a balance: the lender covers a major share, while you show your commitment by contributing the rest. 

Guidelines on LTV for Home Loans

The central bank regulates how much funding can be offered based on the property’s price bracket. Current rules state: 

• For properties valued up to Rs.30 Lakh – LTV can go up to 90% 
• For properties between Rs.30 Lakh and Rs.75 Lakh – LTV is capped at 80% 
• For properties above Rs.75 Lakh – financing is limited to 75% 

This means the higher the property cost, the lower the proportion that can be borrowed. The rule ensures both borrower and lender share responsibility and reduces the risk of over-borrowing. 

Also Read: More Guidelines on Loan-To-Value Ratio 

Why Can’t You Borrow the Full Value?

The framework is designed to encourage prudent borrowing. Requiring a down payment ensures you have equity in the property from the start.  

Eligibility and Your Role in the Down Payment

While the government sets the maximum limits, your actual sanctioned amount will also depend on your income, credit score, repayment capacity, and age. Even at the highest permitted LTV (90%), you still need to contribute 10% of the loan amount. For higher-value properties, your contribution rises further. 

This contribution signals your financial discipline and commitment, both of which can improve your credibility as a borrower. 

Alternatives When You Need More Funds

Borrowers sometimes may wonder if there are ways to cover the remaining cost without dipping too deeply into savings. Some options include: 

• Adding a financial co-applicant can increase eligibility 
• Using housing schemes or subsidies that reduce the upfront contribution for eligible borrowers. 

Considerations with a Minimal Down Payment

While a higher LTV reduces your upfront repayment amount, it also means a larger loan and higher EMIs. This increases your overall interest outgo across the tenure.  

How to Apply for a Home Loan Within LTV Limits?

The process is straightforward once you understand the ratio. First, confirm the property’s value and check which LTV bracket it falls under. Then, prepare documents such as identity and address proofs, income records, and property papers. When you apply, the lender will assess your profile and determine the eligible loan amount. You will then need to arrange the balance as your contribution before the loan can be disbursed. 

The idea of borrowing the full property cost may sound appealing, but the Loan-to-Value ratio makes it clear that some personal upfront contribution is always required. Depending on the property value, you can get up to 90%, 80%, or 75% of the amount financed. 

For the most up-to-date rules, always refer to the official circulars and notifications published on the Reserve Bank of India’s website.