LTV Ratio
Loan to Value is the loan amount expressed as a percentage of the asset's assessed value.
RBI norms allow up to 90% LTV for small home loans, 75% to 80% for larger ones, and 75% for gold loans. The balance is your down payment or margin.
Why LTV Ratio matters when comparing products
The Loan-to-Value (LTV) ratio is a crucial metric for Indian borrowers as it directly indicates the maximum funding available for an asset purchase. A higher LTV means a lower upfront down payment is required from the borrower, impacting affordability and cash flow. Conversely, a lower LTV necessitates a larger initial contribution. Understanding this ratio helps in comparing various loan offerings and assessing personal financial readiness for different asset acquisitions.
Illustrative example
Suppose a property is valued at ₹50,00,000. If a lender offers an 80% LTV, the maximum loan amount would be ₹40,00,000 (80% of ₹50,00,000). The borrower would then need to arrange the remaining ₹10,00,000 as a down payment. If another lender offers a 70% LTV, the loan would be ₹35,00,000, requiring a ₹15,00,000 down payment.