The LTV ratio tells how much investment the financial institution will come up with in comparison to the assets, automobiles, or asset for which you are taking the mortgage.
Recognize how the LTV ratio is calculated.
While you're taking a domestic loan, vehicle mortgage, private loan, etc. from the bank, the financial institution seems to consider many factors. LTV, i.e., mortgage to fee ratio, is likewise a critical thing. The LTV ratio tells how much funding the financial institution will come up with in comparison to the property, car, or asset for which you are taking the loan. It's very important to recognize this, as it directly affects the loan approval, EMI, and down payment. Allow us to apprehend this in simple language.
That is how LTV is calculated.
LTV ratio = (mortgage amount ÷ general price of belongings or asset) × one hundred. For example, suppose you are buying belongings really worth ₹50 lakh and the financial institution is supplying you with a mortgage of ₹35 lakh for it, then practice the system to calculate the LTV ratio (LTV ratio (%) = (₹40 lakh ÷ ₹50 lakh) × a hundred = 70%. Because of this, the financial institution can give you a mortgage of up to 70% of the mortgage amount; you may have to arrange for the final 30% yourself.
This is how it affects your down payment and EMI.
The better the LTV ratio, the extra mortgage you'll be able to take from the bank, and you'll have to make a smaller down payment for the belongings. However, a better loan is not right for the destiny. Whilst you take a higher amount as a loan from the financial institution, the hazard for the financial institution also increases. In one of these scenarios, the bank can price you greater interest on the mortgage. Other than this, if the mortgage is extra, then the down price will need to be less; however, because of the higher mortgage quantity, your EMI will boom.
Alternatively, if the LTV ratio is much less, the mortgage will be less, and the risk for the financial institution can be much less. In this sort of state of affairs, you should pay a greater down payment; however, you will have to pay much less EMI on the mortgage. At the same time, due to the lower quantity, the chances of mortgage approval may even grow. That means LTV directly influences your down price and EMI. In this kind of scenario, before applying for a mortgage, simply check the LTV ratio as soon as possible.
What is the maximum LTV ratio for which loan?
Home mortgage
For domestic loans up to ₹ 30 lakh, the LTV ratio can be as much as 90%.
For loans from ₹ 30 lakh to ₹ 75 lakh, the LTV ratio can be as much as eighty percent.
For home loans above ₹seventy-five lakh, the LTV ratio may be up to 75%.
Car loan
The maximum ltv ratio for an automobile mortgage is usually 80%; however, some banks offer the facility up to a hundred percent.
Gold mortgage
The highest LTV ratio for a gold mortgage is seventy-five%.