Loan to Value Ratio

LTV helps lenders assess risk in lending, especially in home loans and loans against property. It shows how much of the asset’s value is covered by the loan versus how much the borrower contributes as a down payment.

Higher LTV means higher risk for lenders, while lower LTV indicates safer lending. In India, LTV limits are regulated by the Reserve Bank of India.

Formula

👉 LTV = (Loan Amount ÷ Property Value) × 100

Why LTV Matters

• Determines loan eligibility
• Impacts interest rate
• Affects down payment requirement

Interpretation

• High LTV (80–90%): Low down payment, higher risk
• Low LTV (50–70%): Higher down payment, lower risk

LTV vs Down Payment

• LTV: Loan portion
• Down Payment: Borrower’s contribution

"If a property is worth ₹50 lakh and the bank gives ₹40 lakh loan: 👉 LTV = 80%"