Loan-to-Value (LTV) Ratio

Definition

LTV is calculated as (Loan Amount / Property Value) x 100. RBI sets maximum limits: 90% for loans up to ₹30 lakhs, 80% for ₹30-75 lakhs, 75% above ₹75 lakhs. For LAP, LTV is typically 50-70%. For LAS, it varies by security type (50-85%).

A lower LTV means more borrower equity and less lender risk, often translating to better interest rates. LTV is calculated on the lower of purchase price and lender’s appraised value.

Frequently Asked Questions

What is a good LTV ratio? ▾

Below 80% is considered safe — more borrower equity and less lender risk. Ideal LTV depends on your financial situation and loan type.

How does LTV affect interest rates? ▾

Some lenders offer lower rates for lower LTV ratios since they represent less risk. Higher LTV may attract higher rates or insurance requirements.

Is LTV based on market value or purchase price? ▾

Typically based on the lower of purchase price and lender's appraised value. If appraised lower, the borrower needs a higher down payment.

Why It Matters

LTV determines maximum borrowable amount and minimum down payment. Understanding LTV helps set realistic property purchase budgets and plan finances.

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