LTV Explained: What Is Loan to Value Ratio and Why It Matters

When applying for a home loan, loan against property, or vehicle loan, banks don’t just check your income or credit score. One of the most important factors they evaluate is LTV, also known as the Loan to Value Ratio.

Understanding LTV helps you know how much loan you can get and how much money you need to arrange from your own pocket.

What Is LTV (Loan to Value Ratio)?

LTV (Loan to Value) is the percentage of the property or asset value that a lender is willing to finance.

LTV Formula:

LTV = (Loan Amount ÷ Value of Property/Asset) × 100

Simple LTV Example

If the value of a property is ₹1 crore and the bank offers a loan of ₹75 lakh, then:

LTV = (75,00,000 ÷ 1,00,00,000) × 100 = 75%

This means the borrower must arrange the remaining 25% (₹25 lakh) from their own funds.

RBI Guidelines on LTV for Home Loans

As per RBI norms, banks follow standard LTV limits:

• Up to ₹30 lakh property value: LTV up to 90%
• ₹30–75 lakh property value: LTV up to 80%
• Above ₹75 lakh property value: LTV up to 75%

For Loan Against Property (LAP), banks usually offer 50%–70% LTV, depending on income and property type.

Why LTV Is Important

LTV directly impacts:

• Loan eligibility
• Down payment requirement
• Interest rate offered
• Bank’s risk assessment

Lower LTV = lower risk for the bank, which often results in better interest rates and faster approval.

High LTV vs Low LTV

High LTV (80–90%)

Pros:

• Lower upfront investment
• Helps first-time buyers

Cons:

• Higher EMIs
• Limited lender options
• Slightly higher interest rates

Low LTV (50–70%)

Pros:

• Lower EMIs
• Better interest rates
• Higher approval chances

Cons:

• Higher upfront capital required

LTV and Property Valuation

Banks consider the lower of:

• Agreement value, or
• Property valuation done by the bank

So even if you buy a property at a higher price, the bank may finance based on a lower valuation, affecting LTV.

How to Improve Your LTV Position

• Increase your down payment
• Buy property at realistic market value
• Choose a longer tenure to manage EMI
• Combine strong income with low FOIR
• Maintain a good credit score

LTV vs FOIR vs Credit Score

How Direct Credit Helps You

Direct Credit helps borrowers understand LTV norms and negotiate better terms with banks. From property valuation support to choosing the best lender for your profile, we ensure maximum eligible loan with minimum stress.

Contact Us

Planning a home loan or loan against property and unsure about LTV limits? The experts at Direct Credit will help you calculate the right loan amount, plan your down payment, and get the best possible offer from top banks and NBFCs.

Call us today at 9010031003 for clear guidance, better rates, and faster loan approvals.