Over the last year, property prices have delivered stellar returns and therefore, not very surprisingly, the real estate sector has become a hot spot for investors looking to gain from the boom that is expected in the coming years. If you are someone who invests in the real estate sector regularly for an investment purpose or someone who is doing so for the first time, you must become familiar with the concept of LTV ratio as an individual’s LTV ratio plays a key role in determining the loan sanction, interest rate and the loan tenor that one will get on their home loan. The LTV ratio is also one of the key factors that determine home loan eligibility and chances of loan approval. 

What is the LTV ratio? LTV ratio refers to the percentage of one’s property’s total current value that can be sanctioned as a loan. When individuals apply for a home loan, as a rule, lenders do not sanction more than 85% of the pledged property’s value as a loan. Lenders ask borrowers to pay the remaining 15% while completing the property purchase. They do so to make sure the borrower has a stake in the property and is also personally invested in it as this reduces chances of loan default. 

For those of you who do not know, home loans are also a type of secured loan and in the case of these loans, the property bought with the loan money serves as collateral. So, if you buy a home with the help of a home loan, the papers of the home bought with loan money will serve as collateral and its papers will stay with your lender until you have completely repaid the loan. 

The LTV ratio is important and lenders assess this ratio as it helps lenders determine the risk involved for them in lending money to an applicant. High LTV ratio loans carry higher risk for lenders and therefore, lenders ask for high interest rates on these loans. A low LTV ratio loan, on the other hand, leads to one being extended low-interest rates and other beneficial loan terms and conditions. If you are planning to avail yourself of a home loan, use an LTV calculator. The LTV calculator is an online tool that allows home loan borrowers to calculate the loan amount they can apply for and get approved easily, their monthly EMI and the total interest payout on their loan. The LTV calculator provides this information based on certain details provided, such as whether salaried or self-employed, the current market value of the pledged collateral, the loan tenor in years and the rate of interest you are being offered. The LTV calculator is a really handy tool that home loan borrowers must use before they apply for a loan. Using this calculator can make repayment planning simple and easy. Using this calculator will also allow you to avail yourself of the best terms and conditions on your loan. Use the calculator and apply for the loan amount you are eligible for and you will be able to avail yourself of low interest rates and a tenor that suits your repayment capacity.