Loan to Value Ratio : Why It Matters for Home & Plot Loans
Loan to Value Ratio : Definition, Formula & Calculation
Applying for a home or land loan? It’s important to understand the Loan-to-Value Ratio (LTV). This tells you how much of a property’s value a lender is willing to finance. Whether you’re eyeing plots, villas, or apartments via Raaj Real Estates, knowing LTV helps you plan well.
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What is the Loan to Value Ratio ?
The Loan-to-Value Ratio, or LTV, is the percentage of the property’s value that a lender is willing to finance through a loan. As a buyer, you make up the rest via a down payment.
Example: If you buy a property valued at ₹50 lakhs and the bank offers a loan of ₹40 lakhs, then:
LTV = (40,00,000 ÷ 50,00,000) × 100 = 80%
That means the bank is financing 80% of the value, and you’ll need to come up with the remaining 20%.
RBI Guidelines for Loan to Value in India
The Reserve Bank of India (RBI) has set maximum LTV limits to manage risk. These limits vary depending on how much the property costs.
| Property Value (for Housing Loans) | Maximum LTV Allowed |
|---|---|
| Up to ₹30 lakhs | 90% |
| ₹30 – ₹75 lakhs | 80% |
| Above ₹75 lakhs | 75% |
| Plot / Land Loans | Usually 70–75% |
These give you a benchmark for what to expect when applying for a loan via Raaj Real Estates or any other developer/bank.
How to Calculate Loan to value
Calculating LTV is straightforward. Use this formula:
LTV Ratio = (Loan Amount ÷ Property Value) × 100
Example:
If your loan is ₹40,00,000 and the property’s value is ₹50,00,000:
LTV = (40,00,000 ÷ 50,00,000) × 100 = 80%
So the lender covers 80% of the value.
Why Loan to Value Matters in Property Buying
Down Payment: Higher LTV means lower upfront payment needed.
Loan Eligibility: Some lenders are more selective when LTV is high.
Interest Rates: Loans with higher LTVs may come with higher interest rates.
Loan Tenure: Lender may limit the maximum tenure depending on your LTV slab.
Knowing your LTV in advance helps you budget better and ensures smoother loan approval.
LTV Differences: Plot Loans vs Housing Loans
Plot / Land Loans: Banks typically offer 70–75% of the land’s value.
Housing (Constructed Property) Loans: Can go up to 90% for affordable segments; for higher-end properties, the LTV tends to be lower.
If you’re considering a plot or house through Raaj Real Estates, check whether your property type falls under land loan or housing loan rules to estimate how much loan you can expect.
High vs Low LTV — What It Means for You
High LTV (≈ 85–90%)
Pros: Smaller down payment, easier upfront cost.
Cons: Stricter eligibility, possibly higher interest rate.
Low LTV (≈ 70–75%)
Pros: Lower risk from lender’s side, maybe better loan terms.
Cons: Higher initial investment needed from you.
Understanding where your LTV falls helps in negotiating or choosing the right loan option.
Raaj Real Estates — Plots & Properties You Can Explore
Raaj Real Estates offers a variety of CMDA-approved plots, villas, and residential properties.
Clear land titles
Flexible payment plans
Properties in developing suburbs where you may get better value
Frequently Asked Questions (FAQ)
Q1. What exactly is LTV?
It’s the percentage of a property’s value that a lender agrees to fund via loan, with the rest to be paid by the buyer.
Q2. How is LTV calculated?
Use the formula: (Loan Amount ÷ Property Value) × 100.
Q3. What is a high LTV?
Generally anything above 80%—you’ll pay less upfront, but may face stricter loan terms or higher interest.
Q4. What’s the maximum LTV for plot loans?
Usually 70–75%, depending on the bank.
