What are the Aspects of an LTV Calculator?

Loan to value or LTV is the ratio of the loan amount offered by a financer against a mortgaged property to the market price of the property at the time of loan processing.

An LTV calculator, as the name suggests, represents the loan to value ratio in terms of percentage. Knowing the loan-to-value percentage in advance will help the borrowers plan their finances accordingly and apply for a loan accordingly. It is a crucial parameter involved in the process of sanctioning advances, specially secured ones like a loan against property.

Why is LTV significant?

The LTV is a necessary parameter in case of secured loans since the principal loan offered by a lender is at best a ratio or percentage of the property’s value. The loan availed is always a discounted amount of the property’s market price.

LTV is always lower than the market value of the property so as to protect the lender’s interests in case of a default. The financial institution will be able to recover the lost amount even if the asset price depreciates after delinquency.

The loan to value percentage in an LTV calculator is evaluated based on the following formula – (100 x principal) / asset price.

Example

Price of a property is Rs.75 lakh and the loan offered is Rs.50 lakh. As per the formula - (100 x 50,00,000)/75,00,000. Hence, the LTV offered is around 66%.

Using an online loan to value calculators eliminates the need for manual calculations and also saves time.

What is the maximum LTV?

In India, the LTV on loans against property usually ranges from 60% to 90%. For home loans, LTV is set by the RBI based on the loan amount –

• 75% - Loans above Rs.75 lakh.

• 80% - Loans between Rs.30 lakh and Rs.75 lakh.

• 90% - Loans up to Rs.30 lakh.

An online LTV calculator can also be helpful to determine the principal if you already know the loan to value and the price of your property.

What determines the LTV?

Some of the factors that determine the LTV include –

1. Credit score

Credit score affects a customer’s loan against property eligibility. Loan applicants having a credit score around or above 750 can secure a higher LTV. Borrowers are deemed more creditworthy if they hold a CIBIL score, which is above the required number. Such individuals also enjoy better preference and may avail additional benefits, like a lower rate of interest.

Hence, applicants must make sure to check their credit score before applying for a loan. They must also make sure to check their credit report as discrepancies in it can lower the score.

1. Applicant’s age

Usually, the age ceiling to avail a high-value loan is 60 years. Hence, lenders will offer a higher LTV to customers in their 20s or 30s since they can generate income for a prolonged period to easily repay the loan.

Applying for a loan against prLoan to value or LTV is the ratio of the loan amount offered by a financer against a mortgaged property to the market price of the property at the time of loan processing. An LTV calculator, as the name suggests, represents the loan to value ratio in terms of percentage. Knowing the loan-to-value percentage in advance will help the borrowers plan their finances accordingly and apply for a loan accordingly. It is a crucial parameter involved in the process of sanctioning advances, specially secured ones like a loan against property.

operty early also makes an applicant more eligible as a borrower. HFCs like Bajaj Housing Finance Limited offers Loan against Property to salaried individuals aged between 33 and 58 years and self-employed applicants aged between 25 and 70 years.

They also provide pre-approved offers that simplify the process of availing financing and helps save time. Pre-approved offers are available on an array of financial products like business loans, home loans, personal loans, etc. Provide only your name and phone number to check your pre-approved offer.

1. Applicant’s portfolio

The applicant’s income and occupation is also a determiner in the LTV. Income in the upper range will attract a higher LTV as the chances of delinquency is comparatively lower with such customers.

Lenders will require bank account statements, Form 16 (salaried), and financial statements (self-employed) to assess a prospective borrower’s income.

1. Existing liabilities

One of the simple eligibility criteria that borrowers have to meet is the Fixed Obligation to Income Ratio (FOIR) or debt-to-income ratio. It is the ratio between an individual’s fixed monthly liabilities and his/her income.

Those with a FOIR below 50% are preferred more by financial institutions. A lower ratio will also be more beneficial for an applicant to secure a loan easily.

Loan applicants who have low or zero liabilities can be eligible for higher LTV. Some LTV calculators provide the option of entering existing obligations as a determinant to display the loan to value.

Customers must assess the above points when opting for a loan against property to secure a high LTV. They should also know how to apply for the loan to avoid any hassles.

Alisha Antil is your best financial helper for insurance. She has a vast experience in finance and loans and provides you the expert advice in ensuring your property and health.