July 6, 2025by Today Finserv0 comments

What is LTV (Loan-to-Value) ratio?

When applying for a home loan, one of the most important terms you’ll come across is the Loan-to-Value (LTV) ratio. Understanding LTV helps you determine how much financing you can get and how much down payment you need to arrange.

At Today Finserv Consulting India, we simplify financial concepts for you. In this guide, we’ll explain what LTV ratio is, how it affects your home loan, and ways to optimize it for better loan approval.

What is LTV (Loan-to-Value) Ratio?

The Loan-to-Value (LTV) ratio is the percentage of the property’s value that a lender is willing to finance. It is calculated as:LTV Ratio=(Loan AmountProperty Value)×100LTV Ratio=(Property ValueLoan Amount​)×100

For example, if a property costs ₹50 lakhs and the bank offers a loan of ₹40 lakhs, the LTV ratio is 80%.

Why is LTV Ratio Important?

  • Determines Loan Eligibility – Higher LTV means a bigger loan but also higher risk for lenders.
  • Affects Down Payment – A lower LTV means you must pay a larger down payment.
  • Impacts Interest Rates – Some lenders offer better rates for lower LTV loans.

Standard LTV Ratio for Home Loans in India

Most Indian lenders follow these LTV guidelines:

  • Up to 90% LTV – For home loans below ₹30 lakhs
  • Up to 80% LTV – For loans between ₹30-75 lakhs
  • Up to 75% LTV – For loans above ₹75 lakhs

Banks may adjust LTV based on borrower profile, credit score, and property type.

How to Reduce Your LTV Ratio?

If you want a lower LTV (meaning a smaller loan and lower risk), consider:
✔ Making a higher down payment
✔ Improving your credit score (better borrowers may get higher LTV)
✔ Choosing a lower-value property within budget

FAQs on LTV Ratio

1. What is a good LTV ratio for a home loan?

A lower LTV (70-80%) is better as it reduces lender risk and may qualify you for lower interest rates.

2. Can I get a 100% LTV home loan in India?

No, RBI regulations cap LTV at 90% for loans under ₹30 lakhs and 75-80% for higher amounts.

3. Does LTV affect EMI?

Yes, a higher LTV means a bigger loan amount, leading to higher EMIs.

4. How is LTV different from loan eligibility?

Loan eligibility depends on income & credit score, while LTV is the % of property value a bank will finance.

5. Can I negotiate LTV with my lender?

Some lenders may offer slightly higher LTV if you have a strong financial profile, but RBI guidelines limit flexibility.

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